Study Finds 33% of Money Spent on IT Development Is Wasted

September 26, 2009 at 1:29 am Leave a comment

IAG Consulting unveiled the results of its 2009 Business Analysis Benchmark report that surveyed over 400 businesses across North America. For the second year in a row, IAG found poor requirements definition and management consumes over one dollar in three of the application development budget. Yet, when companies move from using ad-hoc requirements processes to institutionalizing a well-constructed requirements definition and management capability:

  • On budget performance for technology projects improved by over 95%;
  • Budget overruns were reduced almost 75%;
  • On-time performance of technology projects increased 161%;
  • Time overruns on projects were reduced 87%; and
  • The percentage of projects that deliver the functionality needed by the business rose by more than 75%.

            The study compared companies at 5 different levels of requirements maturity: ad-hoc, defined, implemented, institutionalized and optimizing. Low maturity companies failed to achieve their business objectives on almost half their projects, while taking 35% more time to complete them. High level maturity companies, however, turned their greater management efficiency into fiscal results with their return on assets averaging 10% higher than comparable publicly traded firms in their industry.

            In the past year, 86.5% of the survey respondents tried to improve requirements discovery and management. Almost two-thirds of those successfully increased both stakeholder satisfaction and on-time/on-budget performance through this improvement strategy.


Common IT Productivity Myths Busted

The study examined and busted a number of commonly held beliefs about IT development effectiveness. Significant findings included:

  • CIOs cannot simply attempt to hire great analysts and expect the problem of poor requirements to go away. In fact, lower skilled people in a high requirements maturity company significantly outperform highly skilled people in a low requirements maturity company. Only organizations that improved all areas of requirements maturity competency dramatically improved overall performance.
  • CIOs cannot gain productivity by just switching development methodologies (e.g., Waterfall to Agile, Iterative, or Prototyping/Visualization-centric approaches). Switching methods offers improvement only if overall requirements maturity also improves during the adoption process.

            “CIOs need a step-by-step path that predictably delivers performance improvement,” said Keith Ellis, VP at IAG Consulting and author of the study. “Focusing on requirements maturity not only shows the long-term gains of doubling productivity, but short-term results are also immediate and tangible.”

            The report lays out a clear framework for requirements maturity and documents how the optimal path changes as maturity level increases. Transformation begins with a clear assessment of the current maturity level and identifying the strength of a company’s requirements processes, techniques, staff skills, technologies, organization and deliverables. Companies that pursued this transformation virtually eliminated project failure, delivering over 90% of projects successfully.

            The report’s most basic finding is that without a commitment to requirements definition and management, IT projects will fail.

            “Companies that rely on IT projects to execute their strategy need to commit to focused development of requirements definition and management capabilities if they are to improve business performance,” concluded Ellis.

            For a copy of the full study, please visit


Entry filed under: Oil & Gas IT Management, Surveys. Tags: , , , , .

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