$5.4 billion a year: the cost of IT failure in NZ

By Rob O’Neill | Monday, November 09 2009

New analysis attempts to calculate the total cost failed IT spending.

ICT failures can be costly disasters, but quantifying the total cost of failed IT investment is incredibly difficult.

That hasn’t deterred software architect Roger Sessions, the CTO of ObjectWatch and a frequent visitor to these shores. In a new report, “The IT Complexity Crisis: Danger and Opportunity”, Sessions has calculated the cost of failure globally, for the US — and for New Zealand.

And our share of the bill, according to Sessions, is US$3.9 billion ($5.4 billion).

“The United States is losing almost as much money per year to IT failure as it did to the financial meltdown,” Sessions writes. “However, the financial meltdown was presumably a one-time affair. The cost of IT failure is paid year after year, with no end in sight.”

Sessions calculates the US failure bill at US$1.2 trillion and the worldwide cost at $6.2 trillion. One reason the numbers are so high is because Sessions has included what many people don’t even think about: the opportunity cost of failure.

“When thinking about indirect costs, you need to include the costs of replacing the failed system, the disruption costs to your business, the lost revenue because of the failed system, the lost opportunity costs on what that lost revenue could have driven, the costs to your customers, lost market share, and on and on,” he writes. “And you need to consider these costs over the number of years the system would have been functional had it not failed — or at least the number of years until you can put another system in place.”

New Zealand plays a curious role in Sessions’ report too. He writes that he loves the coffee here, but he has another reason to love New Zealand: “I see New Zealand as offering the world a glimmer of hope of escaping the coming meltdown of IT.”

Read more at computerworld.co.nz