Double Whammy - How ICT Projects are Fooled by Randomness and Screwed by Political Intent

The cost-benefit analysis formulates the holy trinity of objectives of project management - cost, schedule, and benefits. As our previous research has shown, ICT projects deviate from their initial cost estimate by more than 10% in 8 out of 10 cases. Academic research has argued that Optimism Bias and Black Swan Blindness cause forecasts to fall short of actual costs. Firstly, optimism bias has been linked to effects of deception and delusion, which is caused by taking the inside-view and ignoring distributional information when making decisions. Secondly, we argued before that Black Swan Blindness makes decision-makers ignore outlying events even if decisions and judgements are based on the outside view. Using a sample of 1,471 ICT projects with a total value of USD 241 billion - we answer the question: Can we show the different effects of Normal Performance, Delusion, and Deception? We calculated the cumulative distribution function (CDF) of (actual-forecast)/forecast. Our results show that the CDF changes at two tipping points - the first one transforms an exponential function into a Gaussian bell curve. The second tipping point transforms the bell curve into a power law distribution with the power of 2. We argue that these results show that project performance up to the first tipping point is politically motivated and project performance above the second tipping point indicates that project managers and decision-makers are fooled by random outliers, because they are blind to thick tails. We then show that Black Swan ICT projects are a significant source of uncertainty to an organisation and that management needs to be aware of

Escalation of Commiement in Software Projects: An Examination of Two Theories

Escalation of commitment is common in many software projects. It stands for the situation where managers decide to continue investing in or supporting a prior decision despite new evidence suggesting the original outcome expectation will be missed. Escalation of commitment is generally considered to be irrational. Past literature has proposed several theories to explain the behaviour. Two commonly used interpretations are self-justification and the framing effect. While both theories have been found effective in causing the escalation of commitment, their relative effect is less studied. The purpose of this study is to further investigate the primary factor that causes the escalation of commitment in software project related decisions. An experiment was designed to examine whether the escalation of commitment exists in different decision contingencies and which theories play a more important role in the escalation. One hundred and sixty two subjects participated in the experiment. The results indicate that both self-justification and problem framing have effects on commitment escalation in software projects but the effect of self-justification is stronger. Significant interaction effect is also found. A commitment is more likely to escalate if the problem is framed positively

Affect and Decision Making in Troubled Information Technology Projects

IT project failure is an enduring problem which has often been associated with bad news reporting and escalation of commitment. The literature in bad news reporting has focused on identifying factors (e.g., organizational climate of silence) that could influence one’s reporting decision. Similarly, the de-escalation literature has primarily investigated conditions or activities (e.g., changes in top management) which promote de-escalation. Nonetheless, what is missing in our understanding is how affect can influence bad news reporting and de-escalation decisions within IT projects. This represents a significant gap in bad news reporting and de-escalation research, as affect (i.e., mood and emotions) is recognized as a fundamental aspect of human life which strongly influences individual perceptions, judgment, and decision making. The aim of this dissertation to provide new insights regarding how affect can influence bad news reporting decisions and de-escalation of commitment within the context of troubled IT projects

Managing IT Outsourcing Risk: Lessons Learned

This document takes stock from several studies on outsourcing risk. A definition of risk is offered and illustration from many case studies is used to show how risk can be managed. Results show that an active risk management approach can reduce risk exposure subtantially while enabling the organizations to still reap the benefits associated with outsourcing. Cet article fait un constat des leçons tirées de récentes analyses du risque d'impartition. Une définition opérationnelle du risque d'impartition est donnée. Les mécanismes de gestion de risque sont également discutés. Les résultats de différentes études démontrent qu'une gestion active du risque permet de réduire sensiblement les niveaux d'exposition au risque, notamment dans le cas de contrats d'impartition des technologies de l'information.Outsourcing of IS, IS risk management, agency theory, transaction cost economics, decision making under risk and uncertainty, Impartition, gestion des risques, agence, coûts de transaction, décision, risque et incertitude

An Examination of the Deaf Effect Response to Bad News Reporting in Information Systems Projects

Information systems project management has historically been a problematic area. One of the reasons for this has been the issue of escalation where resources continue to be committed to a failing course of action. While many causes of escalation have been proposed, this dissertation investigates one possible cause: that the project manager may not hear, ignores or overrules a report of bad news to continue a failing course of action: the Deaf Effect response to bad news reporting. This effect has not been previously studied within the information systems literature. In this dissertation, the Deaf Effect is examined through a series of three laboratory experiments and a case study. It finds that in a conducive environment, where the bad news reporter is not seen as credible, and the risk of project failure is seen as low, decision makers tend to view the report of bad news as irrelevant and thus ignore or overrule the report of bad news and continue the current course of action. Role Prescription of the bad news reporter, illusion of control and a perception of a highly politicized environment are factors that also increase the occurrence of the Deaf Effect

IT governance in SMEs: trust or control?

It is believed by many scholars that a small and medium-sized enterprise (SME) cannot be seen through the lens of a large firm. Theories which explain IT governance in large organizations and methodologies used by practitioners can therefore not be extrapolated to SMEs, which have a completely different economic, cultural and managerial environment. SMEs suffer from resource poverty, have less IS experience and need more external support. SMEs largely contribute to the failure of many IS projects. We define an out-sourced information system failure (OISF) as a failure of IT governance in an SME environment and propose a structure for stating propositions derived from both agency theory and theory of trust. The theoretical question addressed in this paper is: how and why do OISFs occur in SMEs? We have chosen a qualitative and positivistic IS case study research strategy based on multiple cases. Eight cases of IS projects were selected. We found that trust is more important than control issues like output-based contracts and structured controls for eliminating opportunistic behaviour in SMEs. We conclude that the world of SMEs is significantly different from that of large companies. This necessitates extra care to be taken on the part of researchers and practitioners when designing artefacts for SMEs

How to Turn Around: Escalation of Commitment in the Context of ISD Project Distress

While information systems development (ISD) projects play a pivotal role in maintaining a competitive advantage, ISD project distress evolves dramatically. Given the complex and dynamic nature of ISD projects, they are prone to Escalation of Commitment (EoC), the irrational tendency to persist with failing courses of action. While EoC has been studied to a great extent in management and psychology literature, research on its role in the context of ISD project distress is fragmented, making it challenging to develop de-escalation strategies. To address this gap, we conduct a literature review on EoC in the context of ISD project distress. The proposed nomological net including triggering factors, consequences, mediators, and moderators, as well as a set of developed de-escalation strategies can serve as an inspiration and foundation for future IS researchers. By presenting this review we hope to inform future IS research to acknowledge the role of EoC in ISD projects

The Role of Evaluability Bias and the Fairness Effect in the Escalation of Commitment to Troubled Software Product Development Projects

New software product development entails considerable risks. One significant risk is that decision makers can become overly committed to troubled software product development projects (i.e., escalation of commitment). While prior research has identified factors that promote escalation in information technology projects, there has been little attempt to leverage the context of software product development, which can include evaluating attributes of a software product under development and weighing a personal financial reward tied to a successful product launch. In this study, we conducted two experiments to investigate how evaluability bias concerning software attributes and the fairness effect that arises from the relative amount of a personal financial reward influence the escalation of commitment to troubled software product development projects. Our findings suggest that the escalation of commitment to troubled software product development projects is influenced by both evaluability bias, which affects the perceived attractiveness of a software product under development, and the fairness effect, which influences the perceived attractiveness of a personal financial reward tied to a successful product launch. This study contributes to both the information systems literature and the escalation literature by providing novel theoretical explanations as to why escalation occurs in the context of new software product developmen

Willingness to Continue with Software Projects: Effects of Feedback Direction and Optimism under High and Low Accountability Conditions

The willingness of managers to continue with software projects can be both beneficial and troubling. Management optimism can help bring promising projects to fruition, but can also cause valuable resources to be expended on faltering projects. This study examines three factors that can affect the willingness of managers to continue with software projects: feedback direction, feedback optimism, and accountability. Feedback direction is the objective information reflecting project prospects. Feedback optimism is the subjective mode with which the objective information has been framed. Accountability is the extent to which the manager feels responsible for project outcomes. Results of a study that manipulated these three factors showed that the effects of feedback direction and feedback optimism on willingness to continue with software projects were additive (either factor alone affected willingness to continue with software projects) when accountability was high but were interactive (both factors jointly affected willingness to continue with software projects) when accountability was low. These findings have useful implications for practice and further research