One-Third of IT Development Spending is Wasted, IAG Study Finds

Report details costs of poor requirements definition and management, tackles assumptions about development methodologies

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IAG Consulting has released the results of its 2009 Business Analysis Benchmark report that surveyed over 400 businesses across North America. For the second consecutive year, IAG found poor requirements definition and management consume over one-third of IT's application development budget. When companies implement a well-constructed requirements definition and management capability:

  • On-budget performance for technology projects improved by over 95 percent
  • Budget overruns were reduced almost 75 percent
  • On-time performance of technology projects increased 161 percent
  • Time overruns on projects were reduced 87 percent
  • The percentage of projects that deliver the desired business functionality rose by over 75 percent

The study compared companies at five different levels of requirements maturity: ad hoc, defined, implemented, institutionalized, and optimizing. Low-maturity companies failed to achieve their business objectives on almost half their projects, while taking 35 percent more time to complete them. High-level maturity companies, however, turned their greater management efficiency into fiscal results with an average return on assets 10 per cent higher than comparable publicly traded firms in their industry.

Report Examines, Busts Common IT Productivity Myths

The study examined several common beliefs about IT development effectiveness. Significant findings include:

  • CIOs cannot simply attempt to hire great analysts and expect the problem of poor requirements to go away. In fact, lower-skilled people in a high-requirements maturity company significantly outperform highly skilled people in a low-requirements maturity company. Only organizations that improved all areas of requirements-maturity competency dramatically improved overall performance.

  • CIOs cannot gain productivity by just switching development methodologies (e.g., waterfall to agile, iterative, or prototyping/visualization-centric approaches). Switching methods offers improvement only if overall requirements maturity also improves during the adoption process.

Getting on the Path to Success

“CIOs need a step-by-step path that predictably delivers performance improvement,” said Keith Ellis, author of the study and vice president at IAG Consulting. “Focusing on requirements maturity not only shows the long-term gains of doubling productivity, but short-term results are also immediate and tangible.” In the past year, 86.5 percent of respondents tried to improve requirements discovery and management. Almost two-thirds of those successfully increased both stakeholder satisfaction and on-time/on-budget performance through this improvement strategy.

The report lays out a clear framework for requirements maturity and documents how the optimal path changes as maturity level increases. Transformation begins with a clear assessment of the current maturity level and identifying the strength of a company’s requirements processes, techniques, staff skills, technologies, organization and deliverables. Companies that pursued this transformation virtually eliminated project failure, delivering over 90 percent of projects successfully.

The report’s most basic finding is that without a commitment to requirements definition and management, IT projects will fail. "Companies and governments who rely on IT projects to execute their strategy," says Ellis, "need to commit to focused development of requirements definition and management capabilities if they are to improve business performance.”

More information, and a copy of the study, is available at

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