Software project failures continue to plague organizations worldwide, with recent analyses revealing that billions spent on technology do not translate into successful outcomes. These failures are typically the result of the shortcomings of human imagination. Unrealized or vague project objectives and an inability to control complexity and risk are leading factors to the failure of these projects. With global IT spending greater than ever, the need to answer why software projects still fail is as important as ever.
The phrase “software crisis” first used in 1968, passing the point that this is not a new problem. In fact, the challenges associated with software projects extend well beyond innovative endeavors and often linger at the mundane edges of technology. The Phoenix payroll crisis for the Canadian government provides the perfect example of this crisis, illustrating how great intentions can end up hurting millions.
Factors Contributing to Software Project Failures
Most software failures start with impractical, poorly defined, or unarticulated requirements. On top of this, many times teams fail to control the complexity of the project in the first place. We often see organizations diving into tech initiatives without understanding the underlying risk. This gulf in comprehension can result in millions of dollars in cost overruns and years in project delays.
Among these cautionary tales is the Canadian government’s Phoenix payroll system, which was launched in April 2016 before quickly descending into disaster. The key project executives were confident they could successfully deliver a complex, modernized payroll system. Even worse, they were planning to build to suit the demands of 80,000 pay rules spread over 105 collective agreements. First, they brushed aside all the far better documented issues that caused the derailment of a similar payroll-system replacement effort in 1995.
“Anyone can make a mistake, but only an idiot persists in his error.” – Cicero
Despite having access to previous insights, Phoenix project managers naively believed they could execute their vision for less than 60 percent of the vendor’s proposed budget. This attitude is indicative of a larger phenomenon in IT projects, where hope triumphs over fear.
The Cost of IT Project Failures
IT project failures don’t discriminate between the ivory tower and the small bean counter, equally impacting the mega corporations and the two-person startups. The fiscal consequences are mind-boggling. IT initiatives are one of the most risky types of projects to undertake from a cost standpoint. Global IT spending more than doubled since 2005. It has more than doubled, increasing from $1.7 trillion to a mind-blowing $5.6 trillion in constant 2025 dollars. Even with this surge in investment, the failure rate of software projects has not significantly changed in the last twenty years.
A recent report indicates that approximately 80 percent of organizations acknowledge that inadequate or outdated technology is hindering their progress and innovation efforts. The disparity between spending and success highlights a critical issue within the industry. Organizations often invest heavily without implementing effective strategies for project management and risk assessment.
In the past nine years, close to 70 percent of the 430,000 current and retired Canadian federal government workers paid through Phoenix suffered from paycheck mistakes. It’s been a huge burden on all workers. This statistic highlights a huge systemic problem that should be raising a lot of questions about accountability and oversight of far-reaching IT initiatives.
Misconceptions About Software Failures
Unfortunately, the fallout from the Phoenix payroll meltdown was unavoidable. People continue to treat it as an outlier, failing to see the larger trend that is developing across multiple sectors. Some observers mistakenly equate this failure with similar instances in other countries, such as Michigan’s MiDAS unemployment system and Australia’s Centrelink “Robodebt” welfare systems. It is key to understand that behind these cases lies a lot of common ground. Each of these examples has its own challenges and contexts.
In this case, software failures occur at the intersection of human ambition and systemic mismanagement. We must not stop there and just pass them off as technical difficulties. Yet human behavior and organizational dynamics are the twin undercurrents that carry a project to its eventual outcome.
“To Engineer Is Human: The Role of Failure in Successful Design” – Henry Petroski
>