Computerworld says IT failure costs NZ$5.4 billion annually

Rob O’Neill’s front page story on today’s Computerworld draws on research by US-based Objectwatch saying the total cost of IT failure in New Zealand is $5.4 billion a year. The story is not online at the time of writing.

Objectwatch’s CTO, Roger Sessions calculated the cost globally, for the US and for New Zealand saying the number includes the indirect costs as well as direct costs.

The number seems unusually large for two reasons:

  • First. For a country with around 4.3 million people Sessions’ waste amounts to around $1280 per person or roughly three percent of GDP* – in plain English that means IT failure wastes one out of every 20 dollars earned in New Zealand.
  • Second. According to IDC numbers in a press release issued in August New Zealand’s total IT market was worth $5,911 million in 2008 and is growing at 3.6 percent. So Sessions’ statement could be interpreted as saying the money spent on IT is wasted.

On this basis we’d be better offer dumping computers and switching back to trusty old adding machines.

One thought on “Computerworld says IT failure costs NZ$5.4 billion annually

  1. I think your analysis is correct: one out of every twenty dollars earned in NZ is lost to IT failure. The IT failures I looked at were specifically those due to poorly managed complexity. And remember, this includes indirect costs.

    Let me give you a hypothetical example. Let’s say NZ has an overly complex IT system for reimbursing pharmacies. That means you paid too much for the initial IT system, you continue to pay too much for the maintenance of that system, your pharmacies pay too much to get reimbursements, the pharmacies must charge too much for pharmaceuticals. In addition, there is the lost opportunity costs involved in how that money could have been spent. The deeper you look into the costs, the more costs you find. And these costs continue, year after year.

    For more information on how I performed these calculations, and, even more important, how to solve this problem, see my white paper at http://objectwatch.com/resources.

    Thanks for the comments!

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