Limit total spending
The greater the amount of money spent on a software project, the greater the odds of failure. As a general rule, plan to spend no more than $10 million on an entire project.10 (There are rare exceptions for extraordinarily complex systems like unemployment insurance, Medicaid Eligibility & Enrollment, and Medicaid Management Information Systems.)
- The requesting agency understands they’re not being given a small percentage of the resources they believe they need — instead, they’re being given an entirely new process to procure software, as well as adequate funding under that model
- If the project "requires" $20 million in funding, what value can be delivered to end users with $10 million? Or $2 million? (If the answer is "none," then this is a project doomed to fail)
- If this spending is matched by federal dollars — especially at a highly-leveraged rate, like the 9:1 match provided by the Centers for Medicare & Medicaid Services for Medicaid Management Information Systems — is anybody going to get in trouble for leaving money on the table?
- Is there somebody whose performance is measured by how much grant funding they raise and who has an incentive to demand that $100 million be spent, instead of $10 million?
10. In The Standish Group’s 2014 CHAOS Report, based on a survey of 25,000 software projects, they found that software projects that cost more than $10 million succeed only 8% of the time. Outcomes improve substantially as the dollar value is reduced, peaking at a 70% success rate for projects under $1 million. ↩︎