The $100 Billion is only part of the story. There are two component costs to IT project failures—the first is more visible, clear-cut and grabs the headlines. The second is less visible, but significantly larger. The first type of costs are those related to IT projects which either fail outright or are otherwise abandoned. These require a total write-off. In the US such costs are widely estimated as falling between $50 and $150 Billion per annum. The lower number is generally regarded as being so conservative that it’s unrealistic. The higher number is thought to be closer to reality, but $100 Billion is widely regarded as the best and most defensible estimate.

The second type of failure costs is harder to both see and quantify, but research by ZDnet and the Institute of Electrical and Electronics Engineers (“IEEE”) provides some good insights. This second type of IT project failure cost comes from rework on all the systems that eventually limp into production but never do what they were supposed to do—so they have to be continually patched throughout their service life. The IEEE notes that almost 50% of a software professionals time is spent on rework rather than on work than is done right the first time. They found that for every dollar avoided up front by short-cutting the business requirements and design processes a company ultimately spends $36-$50 pre-release or go-live to fix what could (should) have been caught earlier. If the error makes it into production, the cost to remediate the issue sky-rockets to as much as 100 times what would have been the up front cost to do it right. Over the service life of the system these remediation costs add up—a bad IT project is a thief that keeps on stealing. Using 2019 IT spending estimates from Gartner along with failure rate analysis from the IEEE yields an estimate of roughly $400 Billion per annum which closely agrees with ZDNet’s separate estimate for these IT project failure costs in the US.

Taken together, the $100 Billion in IT project write-offs and $400 Billion in unnecessary system rework total $500 Billion in annual IT project failure costs.