"Deep down, ambitious executives believe they will be the next eBay, and that's a good thing," Wood says. "So when it comes time to build, small companies buy expensive servers or managed hosting ('to grow into') when Amazon's cloud will serve them surpassingly well. Medium-sized companies buy elaborate blade infrastructure and Tier 1 bandwidth in major markets like New York or San Francisco, when they only need downmarket hardware and more affordable hosting solutions. And they will never meet a salesperson who doesn't agree."
IT's biggest money waster No. 6: IT projects gone wild
Ambitious, big-budget IT projects often seem to have failure built in from the start. In survey after survey, IT organizations have reported project failure rates of 30 to 70 percent.
The tech industry is rife with stories of multi-million-dollar projects that are late, overbudget, or simply abandoned. According to the Standish Group's 2009 CHAOS report, one out of four IT projects is never completed, collectively costing companies billions of dollars.
"The most common root causes of IT waste I see follows a theme of poor IT project management," says Chris Stephenson, partner and co-founder of Arryve, a Seattle-based strategy and management consulting firm. The biggest problems? Failure to adopt a standard way to measure a project's success (or lack thereof) and a hands-off approach from management.
"Too often, IT-related projects are a series of hand-offs from the business to the developers to the testers to operations," he says. "Without involving all parties throughout the entire project, alignment is quickly lost and duplicative work efforts occur. I'd estimate the time to complete projects that do not follow [sound IT project management] rules double the cost and time of IT projects. They also increase the risk of low business adoption or outright project abandonment."
The biggest single money suck in most failed projects isn't software or hardware -- it's the cost of employees whose time has gone into them, says Curt Finch, CEO of Journyx, a maker of Web-based time-tracking and project management tools.
"IT projects fail because they are out of control, overbudget, or broken," says Finch. "Companies must figure out which of their IT projects are high-risk and which ones are low-risk. The best way to measure that risk is to track employee time spent on projects, while simultaneously estimating how much of the project is complete. If the project budget is 1,000 person-hours and 50 percent (i.e., 500 hours) is used up but the project is only 15 percent complete, then you know you have a high-risk project -- and a big problem."
You can avoid an endless money pit by following a few commonsense rules, says Finch. For example: Don't start projects you know you can't finish or take up three projects when you have the resources to complete only one. Take the pulse of your project on a regular basis. If it's only 10 percent done but you've spent 15 percent of the money, odds are the numbers will only get worse. Give accurate status updates; if a project is behind schedule and/or over budget, hiding that fact will only hurt you later.
"This is all very basic -- not easy, but basic -- yet almost no one does it well," Finch says. "If a project is in trouble and management really wants it to succeed, they'll find a way to help. Otherwise, they'll start looking for someone to blame. In that case, you'd better start looking for a new job."
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This story, "IT's biggest money wasters," was originally published at InfoWorld.com.