ABSTRACT

If managers assume a normal or near-normal distribution of Information Technology (IT) project cost overruns, as is common, and cost overruns can be shown to follow a power-law distribution, managers may be unwittingly exposing their organizations to extreme risk by severely underestimating the probability of large cost overruns. In this research, we collect and analyze a large sample comprised of 5,392 IT projects to empirically examine the probability distribution of IT project cost overruns. Further, we propose and examine a mechanism that can explain such a distribution. Our results reveal that IT projects are far riskier in terms of cost than normally assumed by decision makers and scholars. Specifically, we found that IT project cost overruns follow a power-law distribution in which there are a large number of projects with relatively small overruns and a fat tail that includes a smaller number of projects with extreme overruns. A possible generative mechanism for the identified power-law distribution is found in interdependencies among technological components in IT systems. We propose and demonstrate, through computer simulation, that a problem in a single technological component can lead to chain reactions in which other interdependent components are affected, causing substantial overruns. What the power law tells us is that extreme IT project cost overruns will occur and that the prevalence of these will be grossly underestimated if managers assume that overruns follow a normal or near-normal distribution. This underscores the importance of realistically assessing and mitigating the cost risk of new IT projects up front.

摘要

如果管理人员假设信息技术 (IT) 项目成本超支的正态分布或接近正态分布（这很常见），并且成本超支可以证明遵循幂律分布，那么管理人员可能会在不知不觉中将其组织严重暴露在极端风险中低估了大笔成本超支的可能性。在这项研究中，我们收集并分析了一个由 5,392 个 IT 项目组成的大样本，以实证检验 IT 项目成本超支的概率分布。此外，我们提出并研究了一种可以解释这种分布的机制。我们的研究结果表明，IT 项目在成本方面的风险远高于决策者和学者通常假设的风险。具体来说，我们发现，IT 项目成本超支遵循幂律分布，其中有大量项目的超支相对较小，而肥尾则包括少量的极度超支项目。在 IT 系统中的技术组件之间的相互依赖关系中发现了已识别的幂律分布的可能生成机制。我们通过计算机模拟提出并证明，单个技术组件中的问题可能导致连锁反应，其中其他相互依赖的组件受到影响，导致大量超支。幂律告诉我们的是，极端的 IT 项目成本超支将会发生，如果经理们假设超支遵循正态或接近正态分布，那么这种情况的普遍性将被严重低估。