What is the ROI for IT Project Governance?
Establishing a benchmark
Raymond Young (PhD, MBA, BBSc, DipEd)
Division of Economics and Financial Studies
Macquarie University
© Raymond Young IT Project Governance: What is the ROI? No 1

Presentation Overview
• The problem with best practice …
• Estimating ROI for IT project governance
– Reported success rates
– Cost of failure
– Assumptions
– Benchmark ROI for IT project governance
• Conclusion
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The problem with best practice
divide tasks, requirements scrubbing, KISS, reduce scope,
simulation/scenarios, prototyping, pilots, testing, user participation, user
• Best practiceandparticipation“Iresults,user managed decisionsand they
surveys, publicising team meetings, user led teams,
have checked with ISACA
user committees good relationships, and
agree with your and promote about [lack
– Project Management: PMBOK, PRINCE2
development, user commitment, monitor progress conclusion open
– IT Services: BS15000, ITILof] supporting evidence.”
discussion, critical task focus, project organisation, external contracts and
– S/W development: ISO/IEC 12207, ISO/IEC 12207
outsourcing, formal procedures, cost allocation structures, pre-scheduling,
costIT Security: 17799, NIST handbookapproach, lack of evidence but
“I am surprised re path-analysis, risk-
– and schedule estimation, incremental
driven Governance: COBIT, AS8015, AS8016 experience supports
– IT project planning, physicalmy own personal with top talent, seek
arrangements, staff
champions, cross training, morale building, manage expectations,
• Challenges games, training, the benefits study and screen potential
implementation role playing,
of best practice.”
– “Little practical standards and methods, and “no consistent impact
actors, specification utility” (Lyytinen 1987) task and organisational
on success” (Kraemer and King 1986)
analysis techniques, information hiding/abstraction and modelling, bench
– Overemphasise technical & project management considerations
marking, flexible governance structures, task matching, contingency
models, managing Sauer 1999, Young 2005)
(Lucas 1975, technology options, adapt authority and decision
structure, modify process model, technical analysis, service assessment,
– Untested against objective criteria (Checkland 1981, Strassman
1995, Young & Jordan 2005)
gain management support, appropriate leadership, change authority or
workflow, adopt/configure new organisational technologies
(Lyytinen, Mathiassen et al)
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The problem with best practice
• Best practice
– Project Management: PMBOK, PRINCE2
– IT Services: BS15000, ITIL
– S/W development: ISO/IEC 12207, ISO/IEC 12207
– IT Security: 17799, NIST handbook
– IT Governance: COBIT, AS8015, AS8016
• Challenges
– “Little practical utility” (Lyytinen 1987) and “no consistent impact
on success” (Kraemer and King 1986)
– Overemphasise technical & project management considerations
(Lucas 1975, Sauer 1999, Young 2005)
– Untested against objective criteria (Checkland 1981, Strassman
1995, Young & Jordan 2005)
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Project vs. Project Management success
(De Wit 1985)
• project management success is less important (Baccarini 1999)
• “benefits are not delivered or realised by the project manager and project
team, they require the actions of operations management.” (Cooke-Davis
2002)
• there is not a strong relationship between project management success
and project success or between project management failure and project
failure (Markus et. al. 2000)
Scope of project success
Scope of project
management success
1 2 3 4 5 6
1 2 3 4 5 6
Initiation Planning Development Implementation Benefit Closedown
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Inconsistent criteria for success
EDP Success: MIS Success: SIS Success:
Technical focus User focus Organisational focus
Information
Quality
Intention
Use
to use
System
Net Benefits
Quality
User Satisfaction
Service
Quality
Delone, W. H. and McLean, E. R. (2003)
The Delone and McLean Model of Information Systems Success: a ten-year update
Journal of Management Information Systems, 19:4, 9-30.
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Reported Success Rates
4–10x (Brynjolfsson & Hitt 1998)
or ROI
30% (Garrity 1963)
30%
Some OK
10-20% (Clegg et al 1997)
35%
2/3 of projects
30-40% No
(Willcocks and Margetts 1994)
deliver no benefits
whatsoever
Fail
15% (Standish 1999,2003)
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Project Governance Assumptions
ROI
ROI 240%
ROI 135%
30%
OK
OK
Some OK
Current Better Excellent
Performance Performance Performance
Some
Cancel
(68% under) (43% under) (15% cancelled)
Fail
No
Fail
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Case Study: Large Aust Organisation
Current Better IT Project
Performance Governance
Total IT $ $160M $160M
% Projects 15% $24M ?
Terminated 15% $3.6M 15% $3.6M
No benefits 35% $8.4M 0% $0.0M
Deliver –
35% $8.4M 52.5% $12.6M
part 17.5
%
Deliver –
15% $3.6M 32.5% $7.8M
all
Estimated
30% $31.2M 135% $56.4M
Benefits
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IT Project Governance
Benchmarks
Annual IT spend Assumption: some - all
Estimated amount on IT projects 30% 50%
Current Better Project Excellent Project
Performance Governance Governance
Terminated 15% 15% 15%
No Benefits 35% 0% 0%
Some Benefits 35% 53% 0%
All Benefits 15% 33% 85%
Estimated ROI 30% 135% 240%
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Conclusion
• Further research – ARC linkage grant, five
collaboration partners contributing $550,000
over 3 years ($100,000 in cash)
• National Implications
– additional $10.5B-$21B pa (1.6 - 3.1% GDP)
• Implications for governance and assurance
– Business value creation
– Audit measures
– Accountability measures
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