February 9, 2021

Three Reasons Why SOWs Cause IT Project Delays and Cost Overruns

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In our experience working with large companies, one principal root cause of an IT project going off budget or off schedule is a poorly written statement of work (SOW) with the external supplier(s) on the project. Almost all IT projects—from digital transformation to more pedestrian support of daily operations—rely heavily on outside suppliers, contractors, and consultants, each with their own SOWs.

In Brightfield’s most recent white paper, Three Reasons Why SOWs Cause IT Project Delays and Cost Overruns, we analyzed 134 IT SOWs collected from the companies we work with, to identify the seeds of IT project delays and cost overruns. Our analysis reveals important insights for CIOs, IT finance leaders, IT portfolio managers, and IT project managers. Below is a brief summary:

Reason 1

The Problem: Sixty-one percent of IT SOWs use Time and Materials (T&M) billing approaches that essentially write blank checks to suppliers.

The Solution: Corporate IT leaders should use other contracting approaches such as Milestone SOWs or staff augmentation contracts. Brightfield’s AI tools can digest all of a company’s IT SOWs and pinpoint which specific projects are better suited for a different contracting approach.

Reason 2

The Problem: Poorly-written deliverable descriptions in Fixed Fee IT SOWs lead to project problems. Insufficient deliverable descriptions lead to rework, delays, and avoidable costs.

The Solution: A Fixed Fee IT SOW requires a clear Deliverables Section with specific descriptions of what will be delivered from the supplier in exchange for the predetermined fee. Brightfield’s tools flag IT SOWs that are higher risk because of poorly written deliverable descriptions.

Reason 3

The Problem: Companies pay very different amounts for the same IT SOW work. Our analysis found that many companies pay amounts for IT SOW work that are three times higher than market rates. We also saw individual companies paying two different amounts for the same IT work in the same location with the same supplier.

The Solution: Companies’ IT teams should use a standardized job taxonomy and local market benchmarks to counteract suppliers’ gaming of roles and rates in SOW’s.

Brightfield possesses the world’s richest dataset on the market for non-employee work as part of our Talent Data Exchange (TDX). Leveraging $400 billion in actual contingent and extended workforce transactions, Brightfield can pinpoint where the company is paying more than market rates for specific work, roles, and locations. Brightfield scans and analyses a company’s IT SOWs (in any format) to identify high-risk contracts and cost savings opportunities, typically on the order of 20-40% of IT SOW spend and helping you avoid these three most common mistakes.

Read the full report here: Three Reasons Why SOWs Cause IT Project Delays and Cost Overruns

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