Software failures are an ever-growing challenge for organizations worldwide. One prominent example is the Canadian federal government’s Phoenix payroll disaster, illustrating this chronic problem. The new Phoenix system that went live in April 2016 was intended to streamline payroll processing for federal employees. Instead, it is hurting the pockets and psyches of thousands of hard-working men and women and their families from coast to coast to coast.
The Phoenix system’s shortcomings highlight a broader trend. Software failures are not limited by geography or sector. They happen all too frequently, as countless underperforming projects woefully miss their intended mark even after pouring in millions of dollars. As of March 2025, more than 349,000 errors in the Phoenix payroll system remain outstanding. Shockingly, more than half of these complaints have been outstanding for over a year. Nearly 70 percent of the roughly 430,000 current and former federal employees dependent on Phoenix are receiving incorrect paychecks. This has imposed an undue financial burden for those most impacted.
The Cost of Software Failures
The fiscal consequences of software malfunctions go well beyond just a missed paycheck. The Canadian government initially anticipated that the Phoenix project could be completed for less than 60 percent of the vendor’s proposed budget. Underlying problems have long been exacerbated by this unreasonable expectation. The developer team is currently meeting that considerable challenge head on as they develop 34 human-resource system interfaces to service all 101 state government agencies and departments.
IT projects are risky, with cost overruns being the most notorious consequence. That’s because they are some of the hardest and most exotic projects to navigate through today’s complicated and fickle public marketplace. Global IT spending has tripled since 2005, from $1.7 trillion to $5.6 trillion in constant 2025 dollars. Yet despite limited success with other behavioral change campaigns, success rates have barely changed over the last 20 years. This action brings to the forefront the important question of who should oversee and carry out these types of projects.
“Anyone can make a mistake, but only an idiot persists in his error.” – Cicero
Tens of thousands of workers experience perpetual monetary anxiety as a result of the Phoenix system. This all-too-common reality is indicative of a much larger problem with failed IT projects. Similar examples can be found in various jurisdictions, such as Michigan’s MiDAS unemployment system and Australia’s Centrelink “Robodebt” welfare systems. The thread that connects all of these failures points to a bigger issue. It shows that there is a cancer spreading in the field of IT project management.
Understanding the Drivers of Failure
What often dooms software projects can’t be blamed on technology — the failures are often deeply human. A lack of imagination, unrealistic project goals, inability to manage complexity, and poor risk management are all cited as common drivers of failure. To be sure, the toughest battles are fought behind bland project execution. This is not merely about shoving the innovative frontier of technology.
Agile projects can have failure rates as high as 65 percent, and up to 90 percent of DevOps initiatives fail to meet organizational expectations. Even with these promising new methodologies and tools, the success rates for software projects continue to be abysmal. The scenario becomes worse with leaders who are either dismissive of risk or miscalculate the complexity associated with a project.
“To Engineer Is Human: The Role of Failure in Successful Design” – Henry Petroski
The Phoenix payroll debacle should be a cautionary tale that regardless of the software it’s rarely a sure thing. With everything on the line, it is imperative for agencies to critically assess their project objectives and approaches, learning from missed opportunities and mistakes from years gone by.
The Implications for Future Projects
Given that organizations large and small are still making monumental investments in technology, the importance of project management has never been more imperative. Those are just a few of the lessons we learned from Phoenix and other failed IT initiatives that can help future projects avoid the same fate. This means a new cultural approach that prioritizes transparency, setting realistic goals and specifications and managing risk ahead of time.
Government agencies and corporations alike can benefit from examining their strategies to ensure that they do not fall victim to similar pitfalls. By focusing on the human factors that ultimately determine any project’s success our partners can increase their likelihood of success. Creating a culture of accountability and continuous improvement will enhance their work.