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Poor business requirements process leads to high project costs, study finds

A recent IAG Consulting study finds that companies that have poor business requirements processes can expect to spend 49% more money and 39% more time on a project.

Good business requirements are like diet and exercise -- most organizations know it's the right thing to do, yet many don't follow such best practices for success.

What blows me away is that everyone says requirements are important, yet almost 70% didn't execute well. There's something fundamentally wrong.
Keith Ellis
IAG Consulting

In fact, nearly 70% of the organizations surveyed for IAG Consulting's new Business Analysis Benchmark report are more likely to have a marginal project outcome or project failure due to poor business requirements. Companies that fall into this group can expect to spend 49% more money and 39% more time than organizations that have superior business requirements processes, technologies and skilled staff, according to the findings.

"What blows me away is that everyone says requirements are important, yet almost 70% didn't execute well. There's something fundamentally wrong," said Keith Ellis, author of the report.

Where organizations go wrong, he said, is they tend to focus on requirements as a static document. Requirements are "both a document and the process behind the technology," he said. "The process and the way you got to consensus are almost as important -- or more important -- than the document itself. That's where people fundamentally mess it up."

On the positive side, the study found that 80% of projects succeeded at companies that have mature requirements processes, technology and competencies.

Spending $5 million for a $3 million project
The IAG report surveyed more than 100 companies, with an average project size of $3 million. For those companies in the survey that have poor requirements practices, the average $3 million project will be on budget less than 20% of the time, and 50% of the time the project will experience massive time and budget overruns. Companies that fall into this category will spend, on average, $5.87 million for that $3 million project.

"What's staggering is that these are strategic projects," Ellis said. "Think about it -- a business spent [over] $5 million and didn't achieve strategic objectives and process objectives."

More information on business requirements elicitation
How a business analyst can help on a software project 

How agile development affects role of business analyst 

Software Requirements, Second Edition -- Chapter 7, Hearing the Voice of the Customer

In contrast, organizations using best requirements practices for a $3 million project will hit that target better than half the time, according to the study. Including all failures, scope creep and mistakes across the portfolio of projects, this group will spend, on average, $3.65 million per $3 million project.

According to Ellis, a good requirements document has to identify the interdependencies in a project and the data being used in the process, and it has to have clear objectives for the project. However, he said, good requirements are much more than a document.

IAG defines a good requirements process as a collaboration that brings key stakeholders together, and these key stakeholders then pull out the underlying issues. The process must also be efficient, Ellis said, especially for the stakeholders. In addition, a good process is proactive, he said, with a business analyst "out there leading that process and ultimately accountable for the process itself."

Yet according to the findings, the vast majority of projects surveyed did not utilize sufficient business analysis skills. As a result, over 41% of the IT development budget for software, staff and external professional services will be consumed by poor requirements at the average company using average analysts versus the optimal organization.

"It's interesting. You've got something fundamentally important to business, and you're not using that skill," Ellis said. "The idea that business requirements can be specified by anybody is less than ideal. It's kind of like saying I'm doing banking and I go and talk to a car dealership. People are trying to use their IT organizations to perform too many roles, and it's creating a problem."

Fixing the problem
The solution, the report suggests, is to make organizational improvements across people, processes and tool. One recommendation that can change the success probabilities on projects is the implementation of what IAG calls elite requirements elicitation skills.

"The better the elicitation skill of the team, or the competency of the team at extracting requirements, the more successful the project will be," Ellis said. "Elicitation skills are all about the ability to ask the right questions at the right time, and proactively help the business stakeholder team describe requirements in an efficient way."

Ellis said more than 60% of organizations said they want to improve in this area.

"What I found interesting is the proportion of organizations saying the role of the business analyst would increase," he said. "I think we're seeing the beginnings of change, where the business analyst is going to become more important to the enterprise and play a more senior role with a higher profile. I think we'll see over time, [the business analyst] will be a pretty important person."

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