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Value as the Criteria for Success

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The Standish Group estimates that in 2013 the worldwide yearly spending for software projects was $750 billion.  The United States accounted for about 40% of this number or about $300 billion. Europe spent about 25% or $200 billion.  Asia accounted for $100 billion.  The rest of the world spent the remaining $150 billion.  Canceled or failed projects were 16% or $120 billion. The United States portion was a little higher and the European portion was slightly lower.  Challenged projects, those that were late, cost more and off-target, were 48% or $360 billion.   Overruns vary with many legitimate reasons, but The Standish Group estimates in 2013 the cost of unintended worldwide overruns is about $80 billion; leaving the cost of worldwide project software failure to be about $200 billion.

However, we have seen many projects that have met the Triple Constraints or successful projects did not return value to the organization or the users and executive sponsor were unsatisfied.  In addition we have seen many challenged projects bring great value to the organization.   We think the better approach is to consider return on value than the Triple constraints.  In researching the $750 billion spent on software projects in 2013, about $200 billion had high value and another $330 billion had an average value.  The remainder had low to no value.   Some of the projects that had no to low value were considered successful and many of the high value projects ended up in the challenged column.

The Standish Group thinks that considering value is the most important criteria for success.  As an example, the United States Government has a distortional percent of the software spending of about $80 billion or 11% per year. However, the cost of their projects is ten times the cost of a similar project in the commercial sector.  For a project that would cost $60 million to develop in a commercial company the government will spend $600 million.  The government’s over spending reduces the value by 90% therefor the value of the $80 billion is down to $8 billion.  We know historically that 20% of the projects will be used therefore the value of the $80 billion is down to about $1.2 billion.

The Standish Group believes that organizations should forget the triple constraints and focus on the value of their project portfolio, not individual projects. In this regard we have created ValueCHECK Optimization and Management Service. The ValueCHECK Optimization and Management Service use our current products of:  ValueCHECK Project Environmental Skills Assessments, individual project assessments, OptiMix, and resolved project assessments. This is a complete service for organizations to outsource their project portfolio optimization and management to us on a continuous basis.

The service is done in three initial steps: Step 1: a skills assessment for any of the group that wants an IT project.  The skills assessment would include a walk through their PM and development process, a project environmental appraisal, and executive sponsor appraisal for current and potential sponsors. Step 2: A pre-project assessment and explosion. Each project would be broken into multiple small projects with firm deliverables.  Each of the small projects would have their own profile with all the constraints. Step 3: Optimization: We would feed all the projects into OptiMix.

OptiMix uses the patented process of converting logical constraints into linear constraints. The key to the approach is relativity. Relativity means the return on value, risk, cost and other constraints are based on the comparison to each of the small projects.  The organization would then complete the projects by the most valued priority. Follow-up:  Each quarter Standish Group advisors would go back to the organization for a few days and do:  a postmortem for completed projects, create profiles for new projects, update the current projects, and run the optimization to update the priorities.

This service will reduce overall project costs, decrease management frustrations, increase innovation, and increase the value of the organization’s portfolio on average of 35% and as much as 50%.