Terminal failures

Computer system disasters have cost billions. And dinosaur bosses must take the blame

DURING 1985, a pounds 16.5m project to computerise the Inland Revenue was abandoned. In 1993, the London Stock Exchange abandoned its Taurus automation scheme after spending pounds 50m. The 17-year project to automate the Department of Social Security is likely to overrun its original budget by four times - an overspend equivalent to a penny on basic rate income tax. And only last Monday, it was reported that the pounds 100m system designed to open the domestic electricity market to competition was unlikely to start on time in April 1998.

These are computer disasters that have made the headlines. But they are just the rubbish we can see atop a great landfill site of overrunning, overspending and out-and-out failure in the trea- cherous world of information technology.

Coopers & Lybrand recently reported that 85 per cent of large UK organisations have installed systems that are late, over budget, or have not done what they were supposed to. C&L will unveil another study in the New Year which will reveal that almost 20 per cent of organisations worldwide have had to abandon IT projects and that more than 10 per cent say they have suffered "significant damage" as a result.

Computerisation has been the great organisational development of the past 20 years. Every organisation of any size has a network of computers running specialist software.

But it is this software - which turns a computer from a dumb box into an intelligent tool - that has landed so many people in so much trouble. Complex organisations need, or think they need, specially designed or customised software; they commission a project to develop it, and that is when the fun starts.

"Major IT projects offer the potential for huge returns, yet very few seem to come to successful conclusions," says Catherine Griffiths, research fellow at Imperial College's IC-Parc in London.

It is impossible to gauge accurately the scale of losses on IT schemes. But according to Leslie Willcocks of the Oxford Institute of Information Management, there is hardly a big organisation in the world that does not have - or has not had - a "dinosaur project". "Many companies have put in complete systems and ripped them out unused," Ms Griffiths says.

Some of the most grotesque waste has been in the defence sector. GEC's contract to produce an early-warning aircraft, scrapped when it was several years late, was in essence a software project; the US Department of Defense has had its share of hi-tech catastrophes.

Smaller projects are less likely to go wrong, but when they do the effect can be cataclysmic. The Performing Rights Society attempted to automate its procedures for collecting royalty payments; the scheme overran by pounds 18m.

With each system costing millions, the cash that has slipped down this technological drainpipe must run into billions. Yet it is largely an unreported story. Whereas big public sector overruns will be picked up by the National Audit Office and publicly displayed, most disasters are swept under the carpet.

Among measures of senior management competence, the ability to handle new technology receives scant attention. Yet in almost every case, it is not the failure of the technology or the technologists that leads to disaster. It is the bosses' inability or unwillingness to understand what must be done to make sure the system works. Worse, there are few signs that they are prepared to grasp the nettle: the recent spate of "outsourcing" (handing over IT operations to another company) sidesteps the problem in the short run - but could be storing up trouble.

Why do computerisation schemes so often fail? In a report, Ms Griffiths and Mr Willcocks have identified typical problems: a failure to define the project's aim; supplier problems; a failure to change the organisation - and the thinking within it - in line with the technology; and too much faith in a "technical fix" for its own sake. Of these, all but supplier problems are managerial failures.

Two of the cases in the study show what can go wrong; one shows how it should be done.

Taurus (the Transfer and Automated Registration of Uncertified Stock) was conceived in 1987 by the London Stock Exchange to replace share certificates with electronic data. Not everyone was keen - registrars, for example would lose their role - so the Exchange set up a series of committees to produce a system that kept everyone happy. The result was that the specification grew like Topsy.

It was never properly established exactly what Taurus was supposed to do, and there was no central co-ordinating group to bash heads together. Committees came and went, and arguments raged over fundamental design. Nevertheless the go-ahead was given to buy a pounds 1m off-the-shelf software program from the US. Another pounds 14m was spent rewriting it - a process that was never finished. Some basic functions, including overnight reconciliation, were omitted or labelled as not urgent. In 1993, after pounds 50m had been spent, Taurus was abandoned.

The DSS's operational strategy is designed to install 40,000 terminals in 1,000 offices. It is probably the largest computerisation programme ever undertaken in Europe, and it is still going - it was started in 1982, and is scheduled to be completed in 1999. When it was started, the cost was put at pounds 700m; by 1993 the estimated cost was pounds 2.6bn.

Mr Willcocks and Ms Griffiths identify a raft of mistakes. One was that DSS managers failed to prepare for staff resistance. After a seven-month strike, half the internal programmers were moved to other areas. They were replaced by consultants, who cost nearly five times as much per head.

There was apartheid between policy makers and computer experts, too. When the Government decided to over-

haul the social security system, the first the IT people knew about it was when a Green Paper was published. Unsurprisingly, long delays followed.

The Singaporeans have shown complex computerisation projects can work. By 1985, Singapore's role as a trading centre was being threatened by fierce competition, and a high-level committee was set up to find a way of improving the efficiency of using the port. It recommended a computerisation strategy that would speed up documentation processes, to make the port more attractive. The TradeNet system started operating on time in 1989, and reduced document-processing time from four days to fifteen minutes. Singapore's future as a port was secured.

TradeNet worked because the project was well-managed, although the backing of an authoritarian government undoubtedly helped. A central body made sure everyone understood what was needed, and agreed with it. "They said if Singapore didn't succeed as a trading nation, the whole country would suffer," Ms Griffiths says. "It was vital that so many top people, including the Prime Minister's son, were closely involved from start to finish."

During the decision-making, the managing committee realised there was no point in just automating an over-complex system - so a lot of time was spent simplifying it first. It also acknowledged that there would be demands for changes once the project was under way, but said they could be made only if a detailed analysis had been made first. Whereas in Taurus or the DSS the programmers had to work frantically to make every change demanded, Singapore switched the priority: they would be made only if there was a solid case for doing so.

The lessons of these three projects ring bells with anyone who has been involved in a large IT project. For one thing, says Geoff Smart, partner with Coopers & Lybrand in charge of systems quality assurance, "it is surprising the number of projects that don't have clearly stated objectives".

Constant changes are a perpetual bugbear. "It's very easy for a project to grow and grow to the point where it can't possibly be implemented," one systems engineer says. "The specifications change faster than the programmers can implement them, so they might find they have put in five days' efforts and slipped six."

Computer projects do have certain features that make them riskier than, say, a bridge. Technology is changing so fast that it may be impossible to resist demands to upgrade it when the project is under way. Conversely, the business may decide to hurl itself into an upheaval that makes the entire project redundant. The fashion for "re-engineering" has left many IT projects stranded on the beach. "Anyone putting out a four-year IT project is taking a risk," says John Coveney, director of systems solutions in Price Waterhouse's management consultancy.

Software projects are also invisible. "You are reliant on progress reports that tell you you are on course," Mr Smart says. "Then you get to the testing and get slippage reported. The fact is that defects have been introduced all the way through, but no one has been testing for them."

The answer to all these problems lies in management. "Large projects can be like Himalayan expeditions," Mr Smart says. "They can be very risky, but they can also be safe if you take them in steps, and if you have good leadership and control risks." Ideally a project should be chopped up into manageable chunks, he says, and there should always be a monitoring system. It sounds an obvious precaution but, it seems, it is one managers often do not take.

Managers also frequently fail to realise computerisation projects are going to change the way a company operates, generating resentment and possibly redundancies. "If people see it's going to demolish their department, you can't expect them to co-operate unless you give them incentives," Mr Smart says. "You have to either retrain them, or give them cash incentives to stay on until the new technology is in."

This all comes back to the role of top management, and its failure to grasp the significance of an IT project. IT directors rarely make it to the main board, which can mean the computer department has too little power - or too much. If it is dangerous to ignore the computer department's pleas, it is lunacy to give it full rein for its most grandiose plans. The answer, as Singapore has proved, is for the strategic and IT sides to be indivisible.

This is why the trend to outsourcing is worrying, Mr Willcocks says. Several government departments, as well as the likes of Rolls-Royce and Lucas, have handed over their IT operations to specialist management groups. "A lot of these deals have little to do with business value and everything to do with saving money in the short term," he says. He has studied seven deals in the US and concluded that only two were successful. They often look good in the short term when the contractor can cut costs, then the lack of strategic involvement starts to damage the company.

o 'Are Major Information Technology Projects Worth the Risk?' by Catherine Griffiths and Leslie Willcocks (Oxford Institute of Information Management/ IC- Parc Imperial College).

Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
The Pipes and Drums of The Scottish Regiments perform during the Opening Ceremony for the Glasgow 2014 Commonwealth Games at Celtic Park on July 23, 2014 in Glasgow, Scotland.
Commonwealth GamesThe actor encouraged the one billion viewers of the event to donate to the children's charity
Sport
Karen Dunbar performs
Entertainers showcase local wit, talent and irrepressible spirit
Sport
Members of the Scotland deleagtion walk past during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
PROMOTED VIDEO
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
Life and Style
fashion Designs are part of feminist art project by a British student
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
Life and Style
Listen here: Apple EarPods offer an alternative
techAre custom, 3D printed earbuds the solution?
Arts and Entertainment
Top guns: Cole advised the makers of Second World War film Fury, starring Brad Pitt
filmLt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a uniform
News
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
A scene from Shakespeare in Love at the Noel Coward Theatre
theatreReview: Shakespeare in Love has moments of sheer stage poetry mixed with effervescent fun
News
Joining forces: young British men feature in an Isis video in which they urge Islamists in the West to join them in Iraq and Syria
newsWill the young Britons fighting in Syria be allowed to return home and resume their lives?
Arts and Entertainment
The nomination of 'The Wake' by Paul Kingsnorth has caused a stir
books
News
i100
Life and Style
food + drinkZebra meat is exotic and lean - but does it taste good?
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

PMO Analyst - London - Banking - £350 - £400

£350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...

Cost Reporting-MI Packs-Edinburgh-Bank-£350/day

£300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...

Insight Analyst – Permanent – Up to £40k – North London

£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

Test Lead - London - Investment Banking

£475 - £525 per day: Orgtel: Test Lead, London, Investment Banking, Technical ...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game