‘Black swans’ can cause vulnerable projects to go bankrupt, say researchers
A new study by Oxford University and McKinsey has revealed that nearly one-in-six big IT projects go over-budget by an average of 200%.
Most projects ran less than 30% over budget, found the study.
According to a BBC report, the study — conducted on 1471 large-scale global IT projects costing more than $170m — also found that when compated to other sectors such as construction, IT spending was three times more likely to get out of control.
However, problems of IT projects were rare said researchers. They blame "black swans" for cost over-runs which can bankrupt vulnerable firms.
Black swan blindness is a metaphor used to describe an event that is a surprise but has a major impact.
IT decision-makers ignore low probability risks, which have a high impact on costs, said the researchers.
Oxford University Professor Bent Flyvbjerg said, "Black swans are negative events that hit you rarely, but when they hit you, they do it with a large impact."
"IT managers tend not to see these black swans, because they assume that they’re rare, and will probably happen to somebody else. They are wrong. They happen much more often than people think."
"We think government IT contracts get more attention, whereas the private sector can hide its details," he said.