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Demystifying Information Technology Projects Success and Failure Factors:

The Cases of California DMV and BancoItamarati Bank

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480 Dr. Harman Preet Singh MuMukshu Journal of huManities,referred Journal Vol. 7, no. 1, June, 2015, issn 0976-5085

Demystifying Information TechnologyProjects Success and Failure Factors: The Cases of

California DMV and BancoItamarati BankDr. Harman Preet Singh*, Dr. Varinder Kumar Sambher** and Dr. Anurag Agarwal***

Abstract

Information Technology (IT) provides competitive advantage to firms and proper implementation of IT projects is one of the key success factors in their business area. Therefore, IT project needs a proper planning, management and support. Several factors affect the success and failure of IT project in the company. The use of new and unproven technology along with poor estimations and weak definitions of requirements at the project planning stage lead to IT failure. IT project failure is a disaster to an organization because the project will be cancelled at some stage during and before implementation. Sometimes IT project overruns the time schedule and budget.In this paper the cases of California Department of Motor Vehicle (DMV) and BancoItamaratiBank are analyzed using PEST analysis and the IT strategy, results, and lesson learned within each cases are mentioned.This paper highlights a proposed model to determine factors affecting success and failure of IT projects.

* Associate Professor, College of Computing Science, DebreBerhan University, Ethiopia ** School of Open Learning, University of Delhi, Delhi, India *** Head, Department of Commerce, S.S. (PG) College, Shahjahanpur, U.P., India

1. Introduction

As defined by the Information Technology Association of America (ITAA), Information Technology (IT) is the study, design, development, implementation, support and management of computer-based information systems, particularly software application and computer hardware(Wikipedia, 2013). The umbrella covering IT can be quite extensive and cover a wide range of fields. IT professionals perform many duties including data management, networking, engineering computer hardware, database and software design, as well as the management and administration of entire systems. The failure rate of IT projects is astounding. Whittaker (1999) defines project failure in three ways: overrunning of its budget by 30% or more, overrunning its schedule by 30% or more, or failing to demonstrate the planned benefits. The Chaos Report (1995) found that more than half of the projects cost an average of 189% of their original estimates and 31% of software

projects are cancelled before completion.On the other hand, the average is only 16.2% for software projects that are completed on-time and on budget.Overall, the success rate was only 16.2% (Type 1), while challenged projects accounted for 52.7% (Type 2), and impaired (canceled) for 31.1% (Type 3) (Chaos Report, 1995). This is shown in Figure 1.

Figure 1: Success and Failure Rates of IT Projects

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481Dr. Harman Preet Singh

For example, 60% of the failed projects were planned to take less than one year to complete and exceeded this time frame (Whittaker, 1999). The use of new and unproven technology along with poor estimations and weak definitions of requirements at the project planning stage also lead to failure (Chaos Report, 1995). Because of these problems, the software industry is often categorized as in a state of crisis (Ewusi-Mensah, 1997).In order to best manage IT projects, it is important to look at the causes of IT failures.

2. Notions of Information Technology Failure

The major notions of IT failures are undeveloped project goals, poor project team composition, lack of project management and control, an inappropriate technological base, lack of senior management involvement, and an overrun schedule and budget. They are described in Table 1.

3. Case Studies

Two case studies are conducted in this research. One case is on California Department of Motor Vehicles and the other case is on BancoItamarati Bank.

3.1. California DMV

In 1987, the California Department of Motor Vehicles (DMV) embarked on a major project to revitalize their drivers license and registration application process in an efficient manner. By 1993, after $45 million dollars had already been spent, the project was canceled (Chaos Report, 1995).

According to a special report issued by DMV, the primary reason for redeveloping this IT application was the adoption of new technology. But the DMV technical community was never truly confident of its viability. The project had no monetary payback, was not supported by executive management, had no user involvement, had poor planning, poor design specifications and unclear objectives. It also did not have the support of the state’s information management staff.

The major reasons for the failure of this project were:

• Undeveloped goals and lack of proper planning. The members of the team clearly did not follow their original plan. Moreover, it lacked any monetary payback.

Table 1: Information Technology Failure Factors

S.No. Failure Factors Descriptions1. Undeveloped Goals (Whittaker, 1999

&Ewusi-Mensah, 1997).Poor planning always led to failure.The results in inability to agree on the missions, goals, or objectives that the project is attempting to undertake.

2. Poor team composition (Ewusi-Mensah, 1997)

If communication between team members is not balanced, they will not be able to share their ideas and therefore the project may suffer.

3. Lack of IT management and control (Ewusi-Mensah, 1997)

IT failure will automatically occur if there is no system to measure progress or identify risks.

4. Inappropriate technology base (Ewusi-Mensah, 1997 and Whittaker, 1999)

If the staff is unequipped with the necessary technology to complete the IT project, it will be almost impossible to succeed.Technology can also affect an IT project if learning to use it takes longer than planned.

5. No senior management involvement (Ewusi-Mensah, 1997)

In there is lack of top management commitment in the ITproject, project will face with lack of resources in terms of money, time and human power and project will not end within its budget and schedule successfully.

6. Process failure (Chris Sauer,1993 andLyytinen, 1987)

It occurs when an IT project cannot be developed within an allocated budget and time schedule

7. Lack of user involvement (Ewusi-Mensah, 1997)

If user is not involved in the development of IT project, then chances of failure are high.

482 Dr. Harman Preet Singh MuMukshu Journal of huManities,referred Journal Vol. 7, no. 1, June, 2015, issn 0976-5085

• No senior management involvement - The project was not supported by executive management.

• Lack of user involvement - The project teams and customers of the company were not involved in this project.

The Political, Economic, Social, and Technological (PEST) analysis is a framework that is used to scan the external environment in which a firm operates.The PEST analysis for California DMV is conducted below:

Political

• California DMV did notfollow the policies and regulations set by the government

• There was internal state politics

Economic

• California DMV did not had monetary policies

• There was no proper management of the business cycle

Social

• There was lack of competent staff

• There were fragmented efforts and lack of team focus

Technological

• There was an inappropriate technology base

• There was no proper customization of information technology solutions

In general, PEST analysis shows that there were challenges in almost every aspects, and lack of proper management led to IT failure.

The IT strategy of California DMV, results obtained and lessons learned are given below:

• IT Strategy - The IT strategy for the case of California DMV was redeveloping the IT application in order to adopt new technology, use modern technology to support the DMV mission and sustain its growth by processing data environment to rapidly respond to change.

• Results Obtained -The IT project did not allocate enough time for customized IT solution. After $45million dollars had been spent, the IT project was canceled. The higher management did not consider all the factors comprehensively,there was unclear planning, lack of user involvement, poor design specifications and insufficient monetary payback.

• Lessons Learned - The IT failure of California DMV can be used as a lesson for companies who plan to implement an IT system. The top management should have a close relationship with the IT development team, have clear mission and objectives, possess sufficient fund, and keep a contingency plan.

3.2. BancoItamaratiBank

Banco Itamarati is a privately-held Brazilian bank. A year after a strategic redirection,it produced an annual net profit growth of 51% and moved from 47th to 15thplace in the Brazilian banking industry. Three fundamental reasons account for BancoItamarati’s success:

1. First, they had a clear vision with documented specific objectives.

2. Second, their top-down level of involvement allowed BancoItamarati to stay on course.

3. Finally, the bank produced incremental, measurable results throughout the planning/implementation period(Chaos Report, 1995).

BancoItamarati’s clear business goal is to be one of Brazil’s top five privately-held banks by the year 2000. Their objectives include maintaining a close relationship with their customers to improve and maintain an understanding of their needs, offering competitive financial solutions, guaranteeing customer satisfaction, and finally producing balanced results for the Itamarati Group. BancoItamarati’s objectives were incorporated into a strategic plan that clearly identified measurable results and individual ownership.

Their strategic plan made technology a key component of the business strategy. Itamarati

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483Dr. Harman Preet Singh

used Itautec’s GRIP OLTP monitor as a basic tool for integrating software components. Executive leadership, a well-communicated plan, and a skilled diverse team provided the foundation for BancoItamarati to achieve their long-term goal, potentially ahead of schedule.

The reflection of BancoItamarati case study can be seen as the case of IT success. In this case study client-server architecture was implemented in order to maintain a close relationship with customers. The reason for BancoItamarati success was due to their clear vision with the documented objectives, executive management support, well communicated plan, skilled team members in software customization. The above factors were prominent indicators for the BancoItamarati success with IT.

PEST Analysis for BancoItamarati Bank

The PEST analysis of Banco Itamarati Bank is given below:

Political

• The government attitude was to be competitive by leveraging IT

• The company was politically stable and highly connected with the IT development team

Economic

• The BancoItamaratiobtained incremental economic growth and became the top five private held banks in brazil

• The IT customization has increased the customer satisfaction and confidence

Social • The bank had well skilled staff

• The staff had good working spirit

• There was team communication and focus

Technological • The bank applied appropriate technology

• The advance in information technology has led to success

The IT strategy, results obtained and lessons learned are discussed below:

• IT Strategy - The IT strategy was to implement client server architecture. It used IT investment as a key component for creating a competitive advantage and used Itautec’s GRIP OLTP monitor as a basic tool for integrating software components.

• Results– The customer relationship were improved, customer loyalty was guaranteed, and competitive financial solution was developed.

• Lesson Learned - Good planning and implementation of the IT systems led to success in case of BancoItamarati bank. IT was exploited as a prominent tool for customer relationship management and differentiate the company from the competition.

4. Case Studies Analysis

The above two cases are compared via-a-vis success and failure factors as shown in Table 2:

Table 2: Comparison of Success and Failure Factors

Success Factors DMV ITAMARATI1. User Involvement Low High2. Executive

Management Support

Low High

3. Clear Statement of Requirements

Low High

4. Proper Planning Low High5. Realistic

ExpectationsHigh High

6. Smaller Project Milestones

Low High

7. Competent Staff Low High8. Clear Vision and

ObjectivesLow High

California DMV had the correct expectations of redeveloping IT applications that would help them to update drivers license and registration process. But they failed on all important factors.In the case of BancoItamarati, IT project succeeded because they were able to fulfill 7 of the 8 factors given above.

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The market position of the California DMV and Banco Itamarati was compared by using GE Matrix. In case of BancoItamarati, industry attractiveness was high and the business strengths was strong. Therefore since the company could successfully leverages its’ IT strategy and compete with a number of competitors. On the other hand,in case of California DMV, industry attractiveness was low and the business strength was weak. Therefore it could not compete with its competitors. The GE matrix is shown in Figure 3.

5. Findings

It has been found from the research that IT project needs a proper planning, management and support to succeed. The lack of managerial skills leads to inappropriate project goals; project monitoring and control; failure to select appropriate technology and methodology. Lack oforganization of internal organizational structure and project team structure also leads to IT projects failure. The factors whose improper management cause IT projects failures are listed below:

Environmental factors: There is a close relationship between environmental factors and IT success and failure level in companies because external environment requires a firm to utilize strategic IT applications in order to survive. The environmental dynamism is an effective factor because environmental uncertainty affect

the IT application of the firm. In an uncertain environment firms should have a high level of strategic application to have IT success.In a highly competitive environment if the companies are not able to develop and implement IT projects that will allow them to gain competitive advantage, companies would not be able to develop successful IT projects.

Internal organization structure factors: Internal organizational structure also affects success of IT project. The compatibility of company’s infrastructure and IT infrastructure is crucial milestone to implement an IT project otherwise project will fail dramatically. The IT capabilities of the firm should match its organizational needs and goals.Organizational structural context of the company also effects the success of IT project because old enterprises are generally poorly equipped to respond to new business needs. Company must have enough managerial and technical skills to handle the IT project. Technical skills of company must be sufficient to develop an IT project otherwise project will end up with a big failure. If top management commitment is low in the IT project, project faces lack of resources in terms of money, time and human power and project will not end within its budget and schedule. IT projects are mainly designed for end users so, user needs and expectations are important when shaping a project. Lack of user participation in IT project

Figure 3: GE Matrix for California DMV and Banco Itamarati Bank

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485Dr. Harman Preet Singh

will lead to failure.

Project team structure factors: The other factor that affect the success of the IT projects is the project team structure. If the project leader has enough experience about the specified project subject, the project has greater chance to gain success. This factor may be more effective if the experience of the manager is similar to the experience of the team members. For greater success rates companies should work with the experienced team members. Moreover, giving the adequate training to the members is another important factor. The project leader should be able to give periodic feedbacks to the team members. Without certain commitment, team members cannot work with a belief of success which may directly bring the project to a certain failure.

Technological and methodological factors: There is a strong relationship between the success of project and the technology and methodology selected in order to develop and implement the

needed IT project. If companies fail to select appropriate technology and methodology,it is most likely going to incur project failure at the end of the project duration. To gain success on IT projects, the firm should start tothink on the project by clearly defining the objectives which may also help them to define proper project scope. With well-defined objectives and project scope, company might be able to select the appropriate technology and methodology. This may increase the chance of implementing successful IT projects. However if these factors are notcomplemented with a detailed project plan, the success may not be gained. Because if predefined objectives are not reached within the planned project duration, it would not mean that the project is successfully finished. Inappropriate technology usage for IT projects implementation leads to failures.

The model in Figure 3 summarizes the major IT failure factors. If these factors are handled well, then it would lead to success of IT projects.

Figure 3: Proposed Model of IT Project Failure Factors

486 Dr. Harman Preet Singh MuMukshu Journal of huManities,referred Journal Vol. 7, no. 1, June, 2015, issn 0976-5085

6. Conclusion

The success and failure of IT projects results from different factors discussed in the case study analysis. The bad political, economic, social and technological factors with in a company hinders the IT innovations to occur. In the case of California DMV,the IT failure happened after $45 million dollars had already been spent on the project. This IT failure resulted from lack of proper planning, lack of top management support, lack of skilled staff, lack of user involvement and inabilityto develop IT project within an allocated budget and time schedule.

Successful IT system requires user involvement, executive management support, clear statement of requirements, proper planning, realistic expectations, smaller project milestones, competent staff, and clear vision and objectives. It is also important to address for environmental, internal organization structure, project team structure, and technological and methodological factors to avoid failures and deliver success in IT projects.

7. References

1. Chris Sauer, Why information systems fail: a case study approach, Alfred Waller Ltd., Publishers, Oxfordshire, UK, 1993.

2. Ewusi-Mensah, Kweku. “Critical Issues in Abondoned Information Systems Development Projects” Communications of the ACM, 40, 1997.

3. Lyytinen K, Hirschheim R. Information failures—a survey and classification of the empirical literature. Oxford Surveys in Information Technology, 4:257–309, 1987.

4. Silverstien, Scott M. “Why Healthcare IT Projects “Go Bad”” Drexel University,Drexel University, 1 April 2008.

5. The Chaos Report, The Standish Group, 1995.

6. Whit taker, Brenda. What Went Wrong? Unsuccessful Information Technology Projects. Information Management & Computer Security. MCB Univeristy,1999.

7. Wikipedia, “Information Technology”, URL: http://en.wikipedia.org/wiki/Information_Technology, 2013

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