What the CHAOS Chronicles 2003 Reveal

Gerrit Klaschke
Cost Xpert Group

"We know why projects fail, we know how to prevent their failure --
so why do they still fail?" - Martin Cobb

When will it be done?

Let us look at some statistics. Studies conducted over the last years show that 66% of all IT
projects fail. This means that they are 20% or more over budget, 20% or more late, and fail to
meet 20% or more of the business requirements for the system. 15% of projects fail
completely and are canceled prior completion. The average cost overrun is 43%. 82% of the
challenged projects experience time overruns. Further, only 52% of required features and
functions make it into the released product.

These numbers are a significant improvement over the previous survey conducted in 1995.
That survey indicated that 80% of IT project failed. In 2003 this number shrank to 66%.
Although fewer projects fail nowadays, the general trend is that more projects are delivered
late; statistically this is at 82%, up from 62% in 1995. However, there is also good news: the
average cost overrun is currently at 43%, down from 180% in 1995.

Although we see some improvements, the impact of the problem is still significant. The
Standish Group estimates a total waste in the United States alone of $82 billion in 2003 (the
total project spending is about $382 billion).

CHAOS Chronicles 1995 vs 2003

180%
80%
62%
42%
31%
1995
82% 66% 52% 43% 15% 2003
Delivered Failed Fail to meet Cost Cancelled
Late Projects objectives Overrun prior to
completion

1
Where do we go from here?

The most effective way to avoid cost and schedule overruns is to get better at making
software cost estimates. Software has become more complex and increased in size, which
makes estimation more challenging, however, several studies (e.g. Standish Group, Capers
Jones) have shown that by using software cost estimation techniques alone, the probability of
completing a project successfully doubles. Estimating the schedule, cost, and resources
needed for the project is paramount for project success.

The bad news according to Boetticher is that 87 % of the time, managers use a human-based
approach which include expert judgment, analogy, and rules of thumb to make software cost
estimates.

A software estimation tool helps you create the best estimate based on your inputs. Apart
from other obvious benefits, this gives you the leverage to sell your estimate to management
and prevent one typical problem: Management often dictates unrealistic project deadlines and
is usually not convinced unless the Project Manager can support his claims with a 3rd party
opinion. With a tool at hand you can rely on mathematical models based on a historical
database of completed projects.

In addition to cost and schedule estimates, the project manager also needs to know whether
the resources (people and time) he has are adequate. Not having enough resources leads to
projects, which overshoot their budgets and deadlines. A software cost estimation tool also
gives you an estimate of how many people are needed at what points in the lifecycle.

The most important aspect of software cost estimation is inputting sizing of the software you
want to create. Estimation tools have different methods to guide you: describe the project
using function points, or other more specialized methods such as Internet points for Web-site
projects, number of Requirements or UML use cases. Assessing a proposed project with the
appropriate sizing methods often allows the Project Manager to assess the complexity of the
software system. This leads to better a better understanding of the risks involved.

Using formal project estimation techniques to determine the schedule, cost and needed
resources of a project is one of the many step to counteract the risk of project failure. In the
long run, this gives you the mileage as it implicitly assists you in defining and managing the
scope of the project .

"We know why projects fail, we know how to prevent their failure --
so why do they still fail?" - Martin Cobb