In March, the information technology analyst company Gartner Group estimated that the average commercial organisation wastes 20 per cent of its IT budget. This translates to $500 billion (?xA3;351 billion) of corporate investment worldwide, of which $140 billion comes from Europe, that is squandered every year.
The statistics on IT project failure are truly staggering. In 1997, the Standish Group, a Boston-based analyst company, found that 22 per cent of IT initiatives were either cancelled or not completed because of quality.
And of the ones that did see the light of day, 84 per cent were either late or over budget.
Gartner has also concluded that in 1996 alone, American companies wasted $82 billion on failed projects.
Some argue that things are actually much worse. Rakesh Kumar, a vice-president at research company Meta Group, estimates that more than half of IT projects end up over deadline and budget.
It's not just failed projects that waste money either. Businesses often end up paying too much for basic software. In 2000, the International Software Benchmarking Standards Group analysed nearly 800 projects in 20 countries and found some businesses were paying up to seven times as much as others for identical software applications.
Given this backdrop, it's hard to see why anyone would go anywhere near information technology. Yet IT is also an incredibly powerful tool that can transform a business process and slash costs by streamlining functions through automation. Add to this the potential of the internet as a mass-communications and education medium, and the benefits of IT become all the more apparent.
The lesson from the commercial sector is clear: IT is a risky business, but worth living with. Michael Earl, a professor at the London Business School, has said that any chief executive not spending 20 per cent of his time thinking about technology is shirking his responsibility to shareholders.
For the third sector, the message may not be as dramatic, but is no less relevant: organisations should be using information technology.
That's not to say charities are ignorant of technology and the web. "Many of the leading organisations in the third sector are doing well partly because they are using IT effectively,
says Paul Ticher, an independent IT consultant and lead author of a report on IT and the voluntary sector funded by the Barings Group earlier this year (Third Sector, 20 March).
According to the think-tank the Future Foundation, more than 90 per cent of charities have a web site, and most offer email newsletters, online donations, news and email enquiries.
The potential for gathering revenue from web sites is impressive. It's estimated that charities raised $100 million online in less than a month following the 11 September terrorist attack. Comic Relief's web site pulled in about ?xA3;2 million in the past year, while the RNLI, Football Aid and the National Trust have also successfully raised funds via the internet.
The National Trust secured 6,000 donations online in its first six months on the web.
Other organisations are using information technology to support their charitable aims in a more fundamental way.
The National Association of Citizen's Advice Bureaux (NACAB) has a five-year plan to develop an IT strategy. The aim is to modernise its services and improve its ability to deliver information to its clients.
NACAB has around 2,000 branches across England, Wales and Northern Ireland dispensing help to some six million citizens, with each office being funded and supported locally.
The first step in NACAB's IT strategy is to send out regular updates on legislation on CD-Rom, a stopgap measure until it has an internet-based national network in place. At the moment, updates are sent to branches on large quantities of paper.
"We will be giving better quality and advice and better service in the next two years through better use of technology,
says Barry Garlick, NACAB's head of bureau IT support services.
But despite these successful examples, many in the sector still allow technophobia to dictate their IT policies.
And technology vendors don't help very much either, says Natalie Melton, a director at web design and training company Antersite. "Some people in the charity sector are technophobic but the IT sector is guilty of being poor at communicating the benefits of its goods in human terms,
she says. "IT people need to work at this to counter the image of IT being just a drain on tight resources."
Other research backs Melton's view. The Barings' report surveyed some 30 non-profit organisations. "The main stumbling block we found wasn't a lack of ideas about IT, but a lack of confidence in the quality of advice managers felt they were getting,
It also found that many organisations felt they did not have the right expertise or resources to implement any significant IT strategy, or even to use what is already in place.
NACAB's solution to the expertise problem is its partnership with IT company Compaq. The company donated a six-figure sum to pay for training NACAB's staff in IT skills over the next three years.
There is a danger, says Ticher, that this fear of IT is based on the failures of large, cutting-edge projects that have been mishandled. "Be cautious, yes,
he says. "But the vast majority of the public sector is working on a much more controlled and smaller scale than these ambitious e-commerce or government IT projects that fail, so there are fewer areas where things can go wrong,
Roger Rawlinson, head of consultancy at the National Computing Centre in Manchester, points to poor implementation in the charity sector.
"Information and communications technology can reduce costs and overheads very effectively and improve efficiency. Many charity organisations know this but their implementation is patchy,
But if charities are over-cautious about implementing IT, then it's with good reason. Charities often feel an ethical commitment not to "waste
resources - even if they have cash to invest in IT.
Charities should budget for IT as a necessity in the same way they budget for office space or staff, says Ticher.
"The sector is, after all, very creative about raising funding and getting the best out of enthusiastic people - this is the same issue,
"Charities are some of the sharpest people we come across when it comes to getting value for money,
To get the best results from an IT strategy, you should be clear from the outset about what you want to achieve, says Rawlinson (see box p18).
"You don't want a cutting-edge, Rolls-Royce solution when a Ford Mondeo would work just as well,
"The key is working out in advance what you want. For example, if it's a new channel such as the internet, is it mainly for visibility and PR, or for revenue generation?"
Ticher argues that charities thinking about implementing an IT strategy should look at similar-sized businesses and see what works for them. Proven technologies can remove most of the risks, he says. "It's not a matter of inventing new things here, but seeing how existing systems can help.
It all comes down to attitude, he says. "We need to get away from the two extremes that IT is rubbish and that IT is wonderful and can solve all your problems - the truth is in the middle."
HOW TO MANAGE A TECHNOLOGY PROJECT
The key lesson from project carnage in the private and public sectors is that IT projects tend to come a cropper when they are too ambitious and poorly scoped at the outset.
In February, the IT trade magazine Computer Weekly and process consultancy the Coverdale Organisation polled some 800 senior IT professionals to try and find out why disasters occur.
The most common reasons, the survey found, are non-technical. Many IT projects floundered on problems with communications, leadership and clarity of purpose. IT projects hit trouble when senior management fails to make a visible commitment to its success. This can result in the project being viewed as unimportant by other employees. Also, employees further down the ladder may not have the power to take important decisions, which can lead to failures in implementation.
And without top-level commitment, the IT strategy may not get tied into the broader aims of the company.
According to Gartner Group, mid-sized organisations tend to enjoy better IT project success than their bigger counterparts by focusing on tightly-controlled cost-driven expenditure rather than ambitious e-business projects.
The National Audit Office has produced a five-point guideline for IT project managers in the civil service:
Cancel the project if it seems over-ambitious.
Always check your in-house resources are able to manage the project. If not, limit the project's scope.
Make sure you think about business complexity when setting specifications.
Avoid creating distorting payment incentives for contractors.
Ensure that sub-contractors are managed within contract requirements.
CASE STUDY: NSPCC MINES ITS DATA TO INCREASE THE AMOUNT OF GIVING
The children's charity the NSPCC is using sophisticated statistical analysis software to probe its database and spot which of its regular donors may be willing to give more.
"We had long been using the traditional ?xA3;15 cash gift, which we'd then try and convert into a regular payment, but wanted to expand this into a ?xA3;2 a month regular direct debit programme. But we decided we weren't segmenting our database effectively enough. We were potentially wasting money on postage and others forms of misdirected effort," says NSPCC direct marketing development manager Tracey Claro.
The NSPCC has 350 staff at its head office, with 180 teams and projects throughout England and Wales.
Its support and administration costs, which include IT, on average account for 10 per cent of its income. The charity runs several databases containing details of around 2.2 million donors. These run on the IBM AS/400 (now iSeries) mid-range computers, a technology platform commonly used by many small- to medium-sized enterprises.
Claro decided to explore software packages to help streamline data analysis after discovering how much an external direct marketing consultancy would charge for the service. "The software option turned out to be half as expensive as the consultancy route," she says.
Claro eventually narrowed the search down to two companies' software.
One of these was soon discarded as being out of her price range as well as for being too complex. "We need to focus our limited resources, and knew we didn't have the skills in-house,
The NSPCC chose the AnswerTree system from US-based SPSS.
This software digs into a set of data and spots patterns and finds co-relations as directed by the user.
The results of NSPCC's "data mining
enabled it to uncover some key predictors of response to their donor mailings, says Claro. This helped the charity develop the most appropriate mailing programme to new donor segments, and by mailing the most responsive candidates more frequently.
Claro anticipates other benefits from the AnswerTree system. "It will help us to develop relationships with donors who want to receive information from the NSPCC and have a more involved role in the work of the society," she argues.
The biggest benefit, however, will be the value for money that the software system provides.
"It will enhance our return on investment by improving retention rates within this valuable group of donors. Plus, mailing donors at an appropriate frequency will reduce our costs by approximately 35 per cent. We also expect to improve our retention rates," she says.