A study on software development project risk, risk management, project outcomes and their inter-relationship

Abstract

Failure of software development projects is a common phenomenon in many organizations around the world. The Standish Group research shows that a staggering 31.1% of projects will be cancelled before they ever get completed. 52.7% of projects will cost 189% of their original estimates. (Standish survey,1999). Software development project risk points to an aspect of a development task, process or environment which, if ignored, tends to adversely affect the project performance. The project performance can be measured in terms of performance on time and cost dimensions as well as on the product performance (quality of the product developed). Software project risk management is a mechanism for minimizing project risk Observations from literature show that while many studies on these constructs are done in developed countries, there is scarcity of literature from India. Also, linkages among project risk, risk management and various dimensions of project outcome are generally overlooked in the IS literature. Hence this research was undertaken with an objective of studying software development project risk, risk management, project outcomes and their inter-relationship in the Indian context. Validated instruments were used to measure risk, risk management and project outcome in software development projects undertaken in India. A second order factor model was developed for risk with five first order factors. Risk management was also identified as a second order construct with four first order factors. These structures were validated using confirmatory factor analysis. Variation in risk across categories of select organization / project characteristics was studied through a series of one way ANOVA tests. Regression model was developed for each of the risk factors by linking it to risk management factors and project /organization characteristics. Similarly regression models were developed for the project outcome measures linking them to risk factors. Integrated models linking risk factors, risk management factors and project outcome measures were tested through structural equation modeling. Quality of the software developed was seen to have a positive relationship with risk management and negative relationship with risk. The other outcome variables, namely time overrun and cost over run, had strong positive relationship with risk. Risk management did not have direct effect on overrun variables. Risk was seen to be acting as an intervening variable between risk management and overrun variables.