CIO
7 signs it's time to kill an IT investment
By: John Edwards
The business case seemed rock solid. Your management colleagues agreed that the investment made sense from every angle. Over time, however, it has become apparent that everybody was dead wrong. Key indicators are signaling that the project is not only failing to meet expectations, but likely headed toward utter failure. Now what?
Knowing when to pull the plug on a failing IT investment before it craters, wiping away time, money, and competitive advantage, is a skill every top CIO possesses. Acquiring this ability requires a combination of insight, experience, and a willingness to pay close attention to the warning signs that indicate a once-promising IT investment may soon be rolling into the digital morgue.
Here are 7 indicators that show it may be time to place a wreath on a once bright and rosy initiative.
1. The project requires constant reexaminations and revisions
Strategic IT investments entail risk, but are generally forward-looking in nature. "They are bets made to proactively create digital options for the firm," explains T. Ravichandran, professor of supply chain management at Rensselaer Polytechnic Institute. Yet if an investment leads to a project that isn't fully up and running within a pre-defined time-frame — perhaps six months or a year — it might be time to rethink the initiative's strategy and goals, or to move on to something else.
Commitment escalation is a major problem afflicting many IT projects, Ravichandran notes. "Because we have sunk some money [into the initiative], we need to continue the course," he states.
Funding an investment incrementally, instead of fully at the outset, can help ensure a project's long-term success. "If key milestones are hit ... fund the next stage, [or] else hold it," Ravichandran suggests. "Often, in this context, the technology might evolve and mature faster."
On the other hand, if all signs point toward disappointment, Ravichandran advises checking with the functional heads who might be sponsoring or spearheading the project before pulling the plug. It may be possible to rescue some of the investment's functional elements. "Many times, it might be easier to scope [the project] down," he notes.
2. The investment was based on a flawed assumption
A mistaken belief about an investment's value, cost, benefit, or consequence can easily doom a project at the starting gate. "Sometimes you realize that the benefit isn’t as great as it was painted to be, or that the cost of operations is going to be higher than you thought it was, or that a basic assumption about your customers or the market is incorrect or has changed dramatically," explains Avery Lyford, chief customer officer at Infostretch, a digital engineering professional services company.
Sometimes, reality arrives to obliterate even the most careful planning. The COVID-19 pandemic, for instance, tossed many enterprise strategies into the recycle bin. "If a decision ... was made before the pandemic, like upgrading internal software systems or internal firewalls, that’s the most absolute clear signal to reevaluate and see if it's still valid," says Brian Haines, vice president of strategy at facilities and workspace management advisory firm FM:Systems.
3. The project has veered far off course
Indications that an investment appears to be drifting away from its intended goals is a major red flag, warns Paul Rohmeyer, associate teaching professor and director of the master's in information systems program at the Stevens Institute of Technology. IT investments are launched to enable or support specific business goals.
"Any indication that anticipated project outcomes may be misaligned with goals should be examined closely, and the project re-evaluated," he suggests. Many factors can lead to misalignment, including situations where project drift creates a system that functions far differently — and not as productively or efficiently — as the one originally envisioned.
Rohmeyer notes that any decision to end a project should be approached thoughtfully and transparently. "However, once the decision is made, the termination should be as swift as possible to quickly stop expenditures and allow resources to be repositioned," he recommends. "Evaluate carefully, make the decision, and then move quickly."
4. Sponsor support is drying up
When key stakeholders start abandoning the ship, it's a strong indication that the investment may no longer be practical or relevant to enterprise operations. "If a project is underfunded or deprioritized, this is a sign that the investment program doesn't currently meet the needs of the business," says Greg Stam, managing director at digital consulting firm Ahead.
The signs of diminishing stakeholder support are usually hard to miss. Sponsors may suddenly stop discussing the project at enterprise meetings and conferences, update requests begin showing signs of impatience or urgency, and key team members may suddenly be withdrawn and reallocated. "The [remaining] team is asked to continue with inadequate resources to deliver the investment," Stam says. "Frequently the scope is cut to finish the project."
5. The investment is failing to generate meaningful business results
An initiative may function like clockwork, fully meeting or exceeding every anticipated technical goal, yet still fail to deliver any measurable time, productivity, or financial improvement. To their dismay, many CIOs discover only late in the game, after huge amounts of money have been poured into the project, that it lacks any sort of compelling ROI. "Some of the reasons for such doomed projects are they either start off as someone's pet project or management's eyes wander toward a shiny new technology," explains Sebastian Grady, president of Rimini Street, an independent software support services provider. Worse yet, the CIO followed a vendor-dictated roadmap. "These projects don't typically ‘move the needle’ for your business, meaning they don't increase revenue, decrease costs, or take market share from your competitors," he states.
IT decisions are ultimately business decisions, observes Aníbal Abarca, CTO of business design and technology consulting firm Wizeline. He reports that digital investments made in 2020 primarily focused on improving customer experience, developing products faster, and maximizing reliability and security. "One red flag that it may be time to discontinue or minimize a particular IT investment would be if it isn’t enabling one of those areas," Abarca says.
Grady recommends ruthlessness when planning and deploying a new investment. "Prioritize everything," he urges. "You must be tough on yourself, resist the major IT vendors, and don't change for the sake of change if it doesn't support a strategic priority with a clear ROI."
6. The investment has failed to gain significant end user support
An investment must deliver some form of meaningful value to its target users. When a once-promising project generates little or no user interest, and has generally faded into the background, it simply becomes a needless drag on enterprise resources. "Don't merely consider how many people in the organization are currently using it, but whether that number has been going down recently and is expected to keep doing so," advises Aviv Ben-Yosef, an IT executive consultant and coach at Aviv Ben-Yosef Consulting.
Ben-Yosef notes that observing key indicators, and making corrections along the way, creates an opportunity to rescue the failing investment. "Rather than being reactive and pulling the plug on something once it has become too late, you can proactively 'skate to where the puck is going to be'," he suggests.
7. The investment is no longer needed
As time and technology march forward, a once-successful project may simply begin to outlive its usefulness. "If the IT investment is no longer providing the expected ROI or value for the business, it becomes a financial drain," observes Robert Goodwin, vice president of engineering at IT services and support firm InfoSystems.
Every IT investment should be periodically subjected to a business case analysis to determine if the initiative is still meeting its expected goals. "In the case that the business need for the investment is no longer required, the IT investment should be terminated," Goodwin recommends. "If the need is still there, then a new IT investment with a more positive ROI should be selected and implemented."
