The hidden costs of large IT change projects

Ok the software vendor is telling you you can have a 70% discount on the licence fees and it can do all you need, sounds great, let's sign up and get new core business systems through the whole organisation!

Hold on, lets just have a quick look at what the true costs will be over 10 years:

1) The disruption to sales, customer service and logistics are likely to be deep for the first 2-6 months as the organisation comes to grips with the new systems, even with the best training new processes are not going to be optimal. Factor in a 20% drop in sales for 3 months plus the related customer dissatisfaction and I bet this makes the Software seem cheap. You can solve this to a degree by ramping up resources, factor in a 20-30% increase in staffing and you may reduce the business disruption to 5-10%

2) History tells us that the consulting costs to adapt and implement will be 5 -10 times the cost of the software. They will be 40-50% greater than the budget or quoted costs, plus add another 30% to both the consultant and internal resource budgets to deliver the capabilities actually needed as "real world" limitations become apparent in the new systems

3) The maintenance will likely be 17-20% of the full list price of the software so over 10 years thats is at lease 6x the cost of the Software, plus you will need consultants to implement and adapt the upgrades

4) Forget about the cost of hardware, it is likely going to be the only thing that is less than the cost of the software.

So the true cost of the project is going to be at least 10-20 times the cost of the software not including business disruption and internal resource costs.

Does your business case still stack up. Do you have protection in your contracts to mitigate against these costs and risks?

Have you really paid hard attention to the primary reasons for IT project failure:

- incomplete/inaccurate requirements gathering
- lack of end user involvement
- incorrect resource mix
- Unrealistic expectations and promises
- Lack of leadership and/or exec support
- Changing requirements
- Poor planning

We can help get your project on the right track by injecting a good dose of reality in the start-up phase, we can't help much with the cost of the software but we can help with the other 90% of the project costs

Note: the table above is from the sandish group who survey IT project effectivness

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