Review of IT Project Management Practices in the UAE

A Study on the UAE IT Industry

ABSTRACT

“I keep six honest serving men, (They taught me all I know);

Their names are What and Why and When And How and Where and Who”.

-Rudyard Kipling

This report presents findings of a research project that explored the distinct approaches of UAE-based IT organisations in following different project management practices to deal with their IT projects. Not too much of project management data on UAE IT industry exists today. Therefore it was decided to do a study on it. The research findings are based on a questionnaire survey conducted between July and August 2008 among 200 organisations of UAE. A total of 48 valid responses were received, representing an overall response rate of 24%.

The study achieved a primary aim of explanatory and constructivist research, which is to enhance knowledge and understanding of a phenomenon. An emergent-based, general systems approach was adopted for the whole project. General System theory is a holistic and analytical approach to solving complex problems. It recognizes relativity of perception and is a general science of ‘wholeness’ (Bertalanffy, 1968). The theory was used to break down the whole research technique into various components yet still maintaining the integrity of the research objective.

A key finding was the high amount of failure risks that came along with IT projects. In addition, it was found that project management added a lot of value to IT projects and if carried out efficiently it could help avoid the failure risks.

A surprise discovery was that although most of the organisations valued project management a lot, they did not have a dedicated Project Management Office (PMO) in place. Further, it was found out that high involvement of external organisations could be one of the factors responsible for the high amount of risks involved with IT projects. It was observed that 25% of the project managers were not aware of the project management maturity levels of their organisations. Project managers seemed to have tough times managing time, cost and risk in IT projects. Also, most of the organisations did not believe in recording the lessons learned and hence knowledge was not transferred to the new projects from the previous ones.

Strong indicators probably exist to warrant further research into investigating the basic reasons behind a high percentage of failed IT projects. Further research into the relationship between project management methodology and project success seems warranted on behalf of the indicators provided by the respondents.

INTRODUCTION

“I have not failed. I’ve just found 10,000 ways that won’t work.”

-Thomas Alva Edison (1847-1931)

“If your project doesn’t work, look for the part that you didn’t think was important“

– Arthur Bloch

“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.”

-Albert Einstein (1879-1955)

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

-Bill Gates

“The Roman bridges of antiquity were very inefficient structures. By modern standards, they used too

much stone, and as a result, far too much labor to build. Over the years we have learned to build bridges

more efficiently, using fewer materials and less labor to perform the same task.”

-Tom Clancy (The Sum of All Fears)

In 1986, Alfred Spector, president of Transarc Corporation, stated that bridge building could be compared to software development. He added, “The premise: Bridges are usually built on-time, on-budget, and do not collapse. On the other hand, software never comes in on-budget or on-time. Also, it always breaks down.”

One of the biggest reasons why bridges come in on-time, on-budget and do not collapse is because their designs are extremely detailed. Once the designing phase is over, it is then frozen and the contractor has very little flexibility in changing the specifications. However, in today’s fast moving business environment, having a frozen design in place means no changes in the business practices. Therefore efforts must be made to use a more flexible model. This could be and has been used as an explanation for development failure.

But beside 3,000 years of experience, there is another difference between software failures and bridge collapses. When a bridge collapses, investigation is carried out and a report is written on the cause of the failure. It is not so in the IT industry where failures are covered up, ignored, and/or rationalized. As a result, the same mistakes are repeated over and over again.

According to the Standish Group report, more than $250 billion is spent every year on IT application development of approximately 175,000 projects in the United States. The average cost of a development project for a small company is $434,000; for a medium company, it is $1,331,000; and for a large company, it is $2,322,000. A great number of these projects will fail. IT projects have always known to be in chaos.

The research showed that a staggering 31.1% of projects got canceled before they ever got completed. Further results indicated that 52.7% of projects had cost 189% of their original estimates. The cost of these failures and overruns were just the tip of the proverbial iceberg. The lost opportunity costs were not measurable, but could easily be in trillions of dollars. The extent of this problem can be realized by looking at example of the City of Denver. The failure to produce reliable software to handle luggage at the new Denver airport was costing the city $1.1 million per day.

Based on this research, in 1995 American companies and government agencies spent $81 billion for canceled software projects. These same organisations paid an additional $59 billion for software projects that were completed, but had exceed their original time estimates. Risk is always a factor when pushing the technology envelope, but many of these projects were as ordinary as a driving license database, a new accounting package, or an order entry system.

On the success side, the average was only 16.2% for software projects that were completed on-time and on-budget. In the larger companies, the news was even worse: only 9% of their projects came in on-time and on-budget. And, even when these projects were completed, many were no more than a mere shadow of their original specification requirements. Projects completed by the largest American companies had only approximately 42% of the originally-proposed features and functions which goes to show that these projects lacked scope management. Smaller companies fared much better in this aspect. 78.4% of their software projects got deployed with at least 74.2% of their original features and functions.

48% of the IT executives in the research sample felt that there were more failures during that period than those five years ago. But it was also observed that over 50% felt that there were fewer or the same number of failures at that point of time than there were five and ten years ago.

So the Standish Group reported an improvement in IT project success rates and claimed that it was due to an increased ability to know when to cancel failing projects. Standish Group Chairman Jim Johnson commented: “The real improvement that I saw was in our ability to-in the worlds of Thomas Edison-know when to stop beating a dead horse…Edison’s key to success was that he failed fairly often; but as he said, he could recognize a dead horse before it started to smell…In information technology we ride dead horses-failing projects-a long time before we give up. But what we are seeing now is that we are able to get off them; able to reduce cost overrun and time overrun. That’s where the major impact came on the success rate.” (Cabanis, 1998)

There is a new or renewed interest in project management today as the number of projects continues to grow and their complexity continues to rise. As already observed, the success rate of IT projects has more than doubled since 1995, but still only about a third are successful in meeting scope, cost, and time goals. More and more projects and organisations can succeed consistently by adopting a more disciplined approach to managing projects.

Research Objectives

This study provides first-hand information on success and failure rates of IT projects in the UAE and on distinct approaches and methodologies followed by all different kinds of IT organisations in governing IT projects. It also aims to survey attitudes of organisations towards distinct project management processes like cost management, time management, risk management, etc. and establish a future direction for organisations so that they realize the value of the most significant process groups of project management and do not neglect them in the forthcoming projects.

It could be useful in the following four areas : (1) it can be helpful for relevant government departments in preparing strategies for project management in the IT industry; (2) it can promote the awareness of commercial benefits of project management among managers in IT companies of UAE and encourage them to seriously consider project management in their businesses; (3) it can increase the competence and confidence in applying project management by local companies by providing management guidance on the selection and development of project management methodologies; and (4) it can be beneficial to the educational institutions of UAE for teaching and conducting further research on information technology project management.

According to the Global Industry Classification Standard (GICS), ‘the IT industry consists of three primary sub-sectors : firstly, Technology Software & Services, including companies that primarily develop software in various fields such as the Internet, applications, systems, databases management and/or home entertainment, and companies that provide information technology consulting and services, as well as data processing and outsourced services; secondly Technology Hardware & Equipment, including manufacturers and distributors of communications equipment, computers and peripherals, electronic equipment and related instruments; and thirdly, Semiconductors & Semiconductor Equipment Manufacturers.’ This particular report is confined to the use of project management among the areas of Technology Software & Services and Technology Hardware & Equipment only. The research was not conducted on the Semiconductors & Semiconductor Equipment Manufacturers in UAE.

Contents of this Report

Chapter Two introduces project management and its significance for any business sector. It then demonstrates the rapid growth in adoption of project management in IT projects. This is followed by a synopsis of the UAE market and the UAE IT industry. The chapter ends signifying the impact of project management on the UAE IT industry. Chapter Three expands on the significance of project management as viewed through academic literature. This outlines how project management is known to add value to IT projects and some characteristics observed by organisations that have gone through the process of formalizing project management (Center for Business Practices). Using past works of the last 20 years, it also highlights the most predominant factors responsible for high failures rates of IT projects. This is followed by views of authors on various project management process groups and methodologies.

Having discussed not only the pros of project management but also the problems faced during the entire process, Chapter Four is concerned with the research methodology and detailed analysis of the survey conducted. Chapter Five brings out the key survey findings in detail and compares these with the literature surveyed in Chapter Two indicating the extent to which the survey findings break new ground.

Chapter Six builds up on the key findings outlined here, their practical implications, and a look towards how this research could be developed. This includes a brief description of limitations of this study and of recommendations on how these limitations could be overcome in subsequent studies.

BACKGROUND

Project management is the most critical business skill and competency of today that forms the basic building block of a knowledge based company for businesses and professions in oil and gas, petroleum, petrochemicals, chemicals, metal and mining, infrastructures, buildings, IT, Healthcare, Finance, Telecoms, Manufacturing, and many more services and banking industries. Project management was declared to be” the best career on earth” by the Fortune magazine. Recently, PMI reported that nowadays more and more organisations and government agencies are adopting and making project management a strategic competency.

Information systems (IS) and information technologies (IT) are the fastest growing industries in developed and most of the developing countries. Huge amounts of money are still being invested in these industries (Abdel-Hamid & Madnick, 1990). Every organisation wants to gain a competitive advantage, maintain it and lead from the front. Hence, there is a corresponding pressure to increase productivity. To maintain a competitive edge in today’s fast-changing world, the success of an organisation depends on effectively developing and adopting information systems.

According to Zells (1994) and other studies, approximately 85% of IT projects under-taken in the western countries are at the lowest level of capability maturity model (CMM). The challenges at this level are to have project planning, project management, configuration management, and quality assurance in place and have them working effectively. To improve project delivery performance, a number of organisations are adopting project management approaches and setting up project management offices (Barnes, 1991; Butterfield & Edwards, 1994; King, 1995; Munns & Bjeirmi, 1996; Raz, 1993; Redmond, 1991).

Current literature on IT projects shows that most of the IT problems are not technical, they are of management, organisational or behavioral nature. (Johnston, 1995; Martin, 1994; Whitten, 1995).

Fisher’s (1991) survey of technology firms showed that if project management improved, time and cost could be reduced by more than 25% and profits would increase by more than 5%. This has since been validated by using different project management methodologies and analyzing the extent to which these practices can be adopted, based on internal benchmarking by the companies involved in the field trials.

The UAE Market & the UAE IT Industry

UAE has realised the significance of project management in the IT due to its rapid growth in the IT industry. As expected by Business Monitor International (BMI), the total size of the UAE IT market is to increase from around US$3.4bn in 2007 to close to US$4bn in 2012. With IT a key element of the Emirates’ development, a number of major local and federal government initiatives together with a strong and diversifying economy should ensure continued growth over the forecast period. Meanwhile, the oil-led boom across the Middle East will continue to be a boost to IT and infrastructure spending in the UAE. (Marketresearch.com, 2007)

As per the BMI report, the federal government is also encouraging the development of ‘smart cities’, another regional trend. In 2007 the government announced that its target of getting 90% of businesses online by the end of the year was likely to be met. Services are becoming an increasingly significant component of many deployment contracts, as evidenced by recent projects by leading UAE corporations such as Emirates Airlines and the local telecom provider Etisalat.

Investment is expected to be strongest in the government, financial, and oil and gas verticals. Other key non-oil sectors driving the economy include banking and finance, which are likely to be the single largest industry vertical in terms of IT investments over the forecast period. Real estate has also experienced a massive investment boom in the past five years, and this is expected to continue and grow, with the National Bank of Dubai projecting at least US$50bn in outlays in property development in the emirate by 2010. (Mindbranch.com, 2007)

Industry Developments

The BMI report states that the UAE federal government’s recently announced UAE Strategic Plan calls for a strengthening of e-government programmes. The focus of the programme is to support implementation of programmes at federal government level. The federal government ministries have often lagged behind progress by the leading local governments, particularly Dubai. As such, Dubai government, which has had many of its departments and services online for some time, will lend expertise to the project.

However, local government continues to dominate and accounts for around 20% of total IT Services spending. Dubai Municipality announced that it expects to spend anything between US$1.6mn and US$2.2mn per year over the next few years implementing its plan of getting 90% of government services online. It is likely the organisation will spend at least US$2.8mn annually on e-government initiatives. Abu Dhabi is accelerating its efforts to emulate Dubai, led by the Abu Dhabi Systems and Information Committee (ADSEIC), a body created in 2005 to develop and drive initiatives to transform government services in the Emirate. (Marketresearch.com, 2007)

From the above trend, it can be observed that the number of IT jobs in UAE has gone up by 5000 percent since 2005. This goes to show how rapidly the UAE IT Industry has grown in the past three years and that it is still going strong.

Competitive Landscape

According to BMI, with government accounting for as much as 40% of IT spending, and e-government programmes alone around half that, vendors are continuing to find opportunities. Recently the Ministry of Development for the Government sector signed a strategic agreement with Microsoft Gulf whereby Microsoft will support federal e-government programmes with training and technical support. Under the agreement Ministries will also use legal Microsoft software. Meanwhile, the leading body for Abu Dhabi’s e-government programme, the Abu Dhabi Systems and Information Committee (ADSIC) signed an Enterprise Licence Agreement with Oracle. The agreement establishes Oracle as a key technology partner and provides for the Abu Dhabi Government to buy Oracle software solutions and support and maintenance services.

The continuing growth in PC sales in 2007 in the UAE did not significantly alter the competitive landscape of a market which accounts for approximately 40% of the overall regional PC sales. Today the market remains dominated by international players such as Acer, Dell and HP with the top five brands accounting for more than 50% of the market. Meanwhile, the share held by local assemblers continues to dwindle, due in part to their relative weakness in the growth area of notebooks. However, local assemblers hope that their future will be brighter since UAE-based firms such as Sky Electronics have already been fighting back. (Mindbranch.com, 2007)

Hardware

The UAE hardware market is estimated at about US$1.4bn in 2007, which shows a 12% growth from US$1.2bn in 2006, and is one of the largest in the region. Much of the growth is due to small and medium enterprise spending, particular on mobile computers, which are expected to account for around 60% of sales over the forecast period. Notebooks are also proving to be popular with the consumer segment, particularly with the introduction of features such as integrated wi-fi, webcam and entertainment features such as HD DVD. Sales of PC notebooks and accessories have been expected to reach more than US$1bn by the end of 2008, while the compound annual growth rate (CAGR) for the 2007 to 2012 period as a whole is expected to be in the region of 8%. Current and future investments in education and e-government, fuelled by new oil revenues, will lead to desktop rollouts in schools, colleges and government offices across the Emirates. (Marketresearch.com, 2007)

Software

BMI estimates that the UAE’s software spending will pass US$400mn in 2008, representing around 17% of the IT expenditure. CAGR for spending on packaged software is put at 10% over the 2007 to 2012 period, with the UAE being of the region’s fastest-growing ERP markets, as more businesses realise the benefits of efficient management of resources within their internal processes.

The UAE also has one of the region’s lowest software piracy rates at just 35% according to the Business Software Association (BSA), which has praised the UAE government and Ministry of Economy for its efforts in promoting anti-piracy initiatives. The government has combated illegal software in a number of ways, both through anti-piracy legislation and enforcement measures. Customer relationship management (CRM) will be one of the growth areas with fewer than 2% of small- to medium-sized enterprises (SMEs) in the Middle East region having a specialised CRM application in place. BMI predicts plenty of room for growth in the forecast period as numerous untapped sub-sectors still exist. Key verticals include process manufacturing (mainly oil and gas), followed by the financial services industry. Two other key segments are the telecom and the public sectors. During the next five years high-growth categories are set to include CRM, enterprise resource planning (ERP) business intelligence, storage and security products. (Mindbranch.com, 2007)

IT Services

BMI expects that the IT Services market will reach a value of more than US$1,003mn by 2012, with outsourcing accounting for an increasingly large portion of up to 25%. IT services revenues compound annual growth rate (CAGR) over the 2006 to 2012 period is expected to be 10%, encouraging vendors to shift their focus away from simply shifting boxes. Services are becoming an increasingly significant component of many deployment contracts, as evidenced by recent projects by leading UAE corporations such as Emirates Airlines and Etisalat. Outsourcing is also predicted to be a growing trend, with recent landmark outsourcing deals awarded by entities such as the Abu Dhabi Water and Electricity Authority (ADWEA)and civil service departments. Global vendors such as IBM Global Services are competing for its business with local companies such as Injazat Data Systems, which with its good government connections has grown to be a major force in the market, reporting BPO deals with 13 leading private and public organisations. (Marketresearch.com, 2007)

E-Readiness

The recent Global Information Technology report sponsored by Cisco noted the UAE’s success in creating a good ICT environment by placing it top of the rankings for 122 countries. The survey, which looks at the preference of countries to leverage the opportunities offered by ICT for development and increased competitiveness, praised the UAE’s good regulatory environment, and clear government leadership in leveraging IT and promoting its use. According to the report, ICT has empowered individuals and revolutionised the business and economic landscape while fostering social networks and companies.

Overall internet penetration in the UAE was estimated at close to 40% by the end of 2006, far above the Middle East and North Africa (MENA) average, reflecting the UAE’s status as one of the most advanced IT countries in the middle-east. Broadband penetration is around 10% and is expected to rise 60% over the forecast period. In terms of e-government development, additional new phases to be introduced in the project last year (as mentioned in the Industry Developments section) include e-portal, e-project, the HR Management System (HRMS) and the Financial Management Integration System (FMIS) projects. The e-government High Committee has expressed satisfaction with the progress made on implementation of the e-government initiative to date. (Mindbranch.com, 2007)

Impact of Project Management on the UAE IT Industry

Project management has already had a significant impact on IT organisations in UAE and much more dramatic effects are anticipated for the years to come. Greater attention needs to be paid to the interaction of information technology with business methods, work patterns, employees and organisational culture.

It was observed that not too much of research work has been carried out on project management in the IT industry of UAE and this is the precise reason why this study was conducted on the UAE market.

LITERATURE REVIEW

“If we built houses the way we build software, the first woodpecker to come along would destroy civilization.”

– John J. Hamre, U.S. Deputy Defense Secretary

Phillips (2004) states that IT project management could be as “as exciting as a white water rafting excursion or as painful as a root canal”. In addition, Anthes (2008) points out that IT project management has always earned a high ranking on the annual list of IT managers’ worries, but in the first-half of the 2008 Vital Signs survey, it took the No. 1 spot. In other words, the process is all about efficiently handling the complexities that come along with IT projects, right from the word go. The study aims to investigate on how difficult it is for organisations to manage IT projects efficiently.

Richardson et al. (2006) claims that project failure is based not only on economic criteria but also on requirements, cost and time parameters. He builds up his reasoning by citing examples of the following project surveys :

• The Robbins-Gioia Survey (2001)

• The Conference Board Survey (2001)

• The KPMG Canada Survey (1997)

• The Chaos Report (1995)

According to IT Cortex (2004), the results of these surveys showed that most of the organisations suffered from high project failure rates and that they heavily exceeded the time and budget constraints.

Similarly, Schwalbe (2007) reports that IT projects come along with high failure risks. He defends his thoughts with a study which was conducted by the Standish Group (CHAOS) in 1995. In the survey it was found that only 16.2% of IT projects were successful and over 31% were cancelled before completion, costing over US$81 billion in the US alone.

However, when the CHAOS study was conducted again in 2001, the results showed improvements in all areas but still only 28% of IT projects succeeded.

The 2001 Standish Group report findings as compared to those of the 1995 report were as follows :

• Time overruns significantly decreased from 222% to 163%

• Cost overruns were down from 189% to 145%

• Required features and functions were up from 61% to 67%

• Successful IT projects rose from to 16% to 28%

One of the objectives of this report is to carry out similar work on finding the failure rates of IT projects but on the UAE market, one on which not much research has been carried out till date.

In many previous studies, project failures due to time delay, cost overrun, and abandonment of IT projects have been widely reported (Bailey, 1996; Gibbs, 1994; Lucas, 1995; Martin, 1994; Ward, 1994). In other industries, causes of project failures are investigated and reports written, but in the IT industry their causes are either covered up or ignored. As a consequence, the IT industry keeps repeating the same mistakes over and over again (Johnston, 1995). This report takes this a step further by observing what percentage of IT organisations in UAE believe in maintaining project reports and lessons learned logs for their subsequent projects.

In many previous studies, the most commonly reported causes of IT project failure were traced out. They were as follows (based on a content analysis of the cited literature):

• Misunderstood requirements (business, technical, and social) (King, 1995; Lane, Palko, & Cronan, 1994; Lavence, 1996);

• Optimistic schedules and budgets (Martin, 1994);

• Inadequate risk assessment and management (Johnston, 1995);

• Inconsistent standards and lack of training in project management (Jones, 1994; O’Conner & Reinsborough, 1992; Phan, Vogel, & Nunamaker, 1995);

• Management of resources (people more than hardware and technology) (Johnston, 1995; Martin, 1994; Ward, 1994);

• Unclear charter for a project (Lavence, 1996);

• Lack of communication (Demery, 1995; Gioia, 1996; Hartman, 2000; Walsh & Kanter, 1988).

On the other hand, Karten studies reasons for failure by compiling a list of ten ways that can guarantee project failure :

1. Abbreviate the planning process

2. Don’t ask “what if?”

3. Minimize customer involvement

4. Select team members by seeing who is available regardless of skill

5. Work people long and hard

6. Don’t inform management of problems

7. Allow changes at any point

8. Discourage questions from team members

9. Don’t give customers progress reports

10. Don’t compare project progress with project estimates

However, this survey goes a bit deeper and also explores the role of project management methodologies and process groups in helping deliver successful projects. The project management frameworks which are rapidly gaining recognition are ITIL, PMBOK and PRINCE2 (Phillips, 2004).

Although Leuenberger (2007) considers ITIL to be one of the world’s best ways to align IT with business objectives,

he also claims that his research conducted through IDC shows points out that 60% of mid-sized businesses in Australia either are unaware of, or have no plans to implement ITIL and also that on a global scale, only 20% of the mid-market companies are currently using ITIL.

In contrast to ITIL, PMI claims that it has grown to become the most widely recognized – and the only global – certification for the project management profession with more than 260,000 members in over 171 countries.

The survey aims to study the UAE IT industry and clarify such claims made by authors and institutes so that the growth of IT project governance methodologies can in an IT industry of a booming economy can be analyzed.

Bainey (2004) states that so many IT projects tend to go over budget, run behind schedule, and deliver products or services poor in quality due to the negligence of integration, consistency and standardization. The report builds up on this by going ahead and investigating the significance of integration management for project managers.

Harris (2005) asserts that it is high time that the PMO function is placed in its proper organisational alignment. He believes that not only can it combine the corporate planning process with effective delivery of products and services but also provide external clients with traditional client services for the enterprise as a whole or for respective enterprise business unit