A recent analysis reveals that despite global IT spending tripling since 2005, software project failures continue to plague organizations worldwide. Human imagination constraints often play an equally important role in these failures. Unclear project objectives and an inability to control for complexity and risk compound the problem. The IT community has done a huge amount of work to help make the arcane—impenetrable, even—much more clear. Software failures are not only still frequent, but increasingly costly.
Bent Flyvbjerg, a professor emeritus at University of Oxford’s Saïd Business School, warns about the financial perils of IT blunders. In his view it’s because they represent the greatest threat in that field. Global IT spending has more than tripled over the last two decades, from $1.7 trillion in 2005 to nearly $5.6 trillion today, in 2025 dollars. And thankfully, this trend is not slowing down anytime soon!
The Software Failure Landscape
The phrase “software crisis” was first coined at the NATO Software Engineering Conference in 1968, illustrating the durability of these industry hurdles. After decades of time and billions of dollars poured into software and the software industry, software success rates continue to languish. The majority of IT failures aren’t the result of cutting edge initiatives that test the bounds of technology. Instead, they can more often be the result of mismanagement of day to day operations.
A poster child of this type of failure is Canada’s Phoenix payroll debacle, which was launched in April 2016. Her project’s high-profile executives were certain they could develop a far more innovative payment system. They hoped to adapt PeopleSoft’s payroll package to manage 80,000 pay rules derived from 105 collective agreements with federal public-service unions. This is the developer team’s ambitious aim. They thought they could do it for under 60 percent of the vendor’s bloated budget.
In reality, the Phoenix project was set up to fail. As of mid-March 2025, the system even contained over 349,000 unresolved errors. Even more shockingly, more than half of these mistakes had been waiting for a year or more to be resolved! Approximately 70 percent of the 430,000 current and former Canadian federal government employees paid through Phoenix experienced paycheck inaccuracies over the past nine years.
“Anyone can make a mistake, but only an idiot persists in his error.” – Cicero
Understanding the Drivers of Failure
The reasons behind software failure are multifaceted. Most projects are doomed by having unrealistic or poorly articulated goals that mislead and misdirect teams in all the wrong directions. Ultimately, human creativity and ingenuity are must-haves for success. Without clear vision and realistic expectations, project outcomes often fall short of original aspirations.
Furthermore, the complexity built into almost all IT projects only adds to this challenge. As the systems mentioned above become more complex, so do the risks for creating and deploying those systems. When these risks go unmanaged, they can snowball to the point of completely derailing entire projects and inflicting millions in financial losses.
We know IT leaders have spent years making a great deal of progress with balances of efficiency loss and risk aversion. Even with these noble efforts, too many projects still fall short. This significant failure primarily results from the pervasive lack of management practices, rather than lack of technical know-how.
“To Engineer Is Human: The Role of Failure in Successful Design” – Henry Petroski
Because when expensive IT failures happen, we all pay, whether as taxpaying citizens or as private-sector commercial companies. Flyvbjerg points out the profound financial exposure related to software failures. These critical failures can lead to major operational outages and damage to a company’s brand reputation.
Organizations run into the problem of the short-term costs of failed projects. They do deal with long-term repercussions that chip away at both stakeholder trust and their own standing in the market. As software projects become increasingly central to operational efficiency and competitiveness, addressing these persistent failures is more critical than ever.
Despite significant investment in technology and management strategies aimed at preventing failure, history suggests that many organizations continue to struggle. A mountain of such cases, like the Phoenix project, show how poor management has been a major factor in failing. It is extremely difficult to find examples in which projects have been well run and professionally managed that resulted in failure.
