Many large-scale IT projects end up taking longer and costing more than expected, and often fail to deliver the intended results. In today’s world, where business success increasingly depends on information technology, business managers must rethink their role in IT project governance.
Executives are often familiar with the fact that large IT projects—such as ERP and CRM implementations, telecom billing system replacements, or management information system (MIS) deployments—tend to require significantly more resources than originally anticipated. For instance, ERP projects often exceed their budgets by an average of 90% and timelines by 120%. Why does this happen so frequently?
The core issue is that while managers allocate substantial resources to IT initiatives, they often don’t fully understand why the project is needed. Many business leaders remain skeptical about the importance of IT, viewing it as a cost center rather than a driver of business value. This skepticism permeates the entire organization, resulting in vague or overly formal business cases, unclear goals, and an absence of defined success metrics. As a result, 70% of CRM implementations fail to deliver business impact, and up to 40% of software capabilities go unused.
Business Justification
Business managers often shy away from justifying IT investments, assuming they lack the technical knowledge or that returns can’t be quantified in traditional financial terms like ROI or NPV.
To simplify, we propose categorizing IT projects into two groups:
- Direct business impact projects (e.g., revenue increase or cost reduction)
- Infrastructure projects (which may not offer immediate returns but are vital for long-term capability building)
A typical example of the first category is CRM implementation. Business leaders should treat this like any other investment, demanding forecasts and accountability for results. If sales leaders can justify hiring 200 new staff with updated revenue plans, they should also quantify the gains expected from CRM adoption. Any claim like “We’ll figure it out after implementation” is unacceptable.
For cost reduction initiatives, IT may simplify fragmented architectures or automate processes. For example, adopting a unified ERP can replace hundreds of legacy systems and streamline support. Automation can cut back-office staffing needs, reduce inventory, or accelerate processes—but only if the business units commit to and plan these improvements.
Even when financial outcomes are hard to predict, IT investments may be essential—such as updating outdated platforms to remain operational. While ERP systems are expensive and difficult to justify strictly on financial terms, they often become the backbone of scalable operations, offering integrated data, standardized processes, and a foundation for further innovation.
Still, managers must avoid labeling every IT initiative as “infrastructure” to sidestep financial accountability. The 80/20 rule applies: 80% of projects should have clear financial justification; the remaining 20% may not, but must still be scrutinized for strategic value.
Business Priority and Accountability
To stop unjustified IT spending, firms must change how funding is allocated and who is accountable for results. Business units typically aren’t responsible for IT outcomes, making them indifferent to cost and results. For example, one European bank spent €50 million over five years on MIS without ever receiving decision-useful data. Why? Because they prioritized technical features over business needs.
Proper IT project prioritization is impossible without active collaboration between business and IT. Business units must have a financial stake in project success. In one American firm, the budget of the business unit is cut by 50% of the projected IT savings at the start of the automation project. In a European insurer, IT effectiveness is tracked monthly with pre-agreed KPIs. Such models incentivize commitment and fast adoption.
Project Governance
Even with a solid business case, poor execution can derail a project. Success requires delivering the planned outcomes, on time, and on budget. ERP projects, with their complex multi-module structures, take years to fully deploy—yet most projects that run over 18 months fail. Execution discipline is paramount, especially in emerging markets where change is constant.
Strong governance mechanisms must be in place to manage scope, risks, and stakeholder engagement. Many firms lack project management experience; hierarchical cultures discourage initiative. Without discipline, teams fall into chaos.
Key principles include:
- Define scope and rollout strategy early. Start with high-impact features to generate quick wins and build trust. Leave complex customization for later.
- Enforce strict scope control. If change requests are not prioritized, scope may balloon. Introduce change freezes or phase-specific change management.
- Create a clear, phased implementation plan. Break projects into manageable stages (6–9 months each) and review progress frequently.
- Institutionalize risk and issue management. Use structured logs to track problems and enforce factual reporting. Even a basic issue database can be transformational.
- Ensure continuous business involvement. Business users must stay engaged beyond initial requirements gathering. Most usability-related decisions occur after specs are written. If business disengages, gaps emerge.
