35% of the IT budget is wasted due to rework caused by poor definition and management of business requirements from IT

Maveric Systems-a leading provider of IT Lifecycle Assurance with a strong focus on the BFSI and Telecom sectors-and NelsonHall, one of the leading global BPO and IT outsourcing research & analysis firms have released a report focusing on business requirements definition and management. The study reveals that gaps exist in understanding the scope of the project between business heads and the IT team, right from the early stage where business requirements are defined. The report additionally identifies the origin of these gaps and why they occur, and the business impact of poor requirements definition and management.

The study was conducted across Tier 1 and Tier 2 banks with 50 IT executives and 50 business executives in U.K., Benelux, Nordics, Middle East & Africa, and Asia Pacific.

The problem

During an IT adoption cycle, the business heads and IT teams usually get into a conflict where the final outcome does not meet the business requirements; 6 out of 10 times, one would find large gaps between the solution and the stated requirements. Ideally in an IT project, 25% - 28% of the time should be spent on writing requirements; in reality, less than 10% of the total time is dedicated to this exercise. Moreover, poor definition of requirements does not meet the vision of any project thereby causing the gap to grow.

Underestimating the consequences of poor business requirements definition always proves costly for the organization. Maveric’s data over the last 10 years indicates that in 50% of the projects, up to 35% of the IT budget is wasted due to rework caused by poor definition and management of requirements.

Defect prevention is always better than defect detection, therefore helping corporates optimize their IT spending and time spent on adopting IT systems. Requirements Assurance has therefore become a key focus area for organizations today, to optimize utilization of funds and resources, and thereby meet the vision of the project.

What is Requirements Assurance?

Requirements Assurance is where the ‘purpose’ and ‘business needs’ are defined clearly; business heads define their requirements to the IT team, and the IT team in turn evaluates and validates these requirements, before moving to the next stage.

The purpose of this study by Maveric Systems and NelsonHall was to establish current practices in requirements assurance and the level of satisfaction, within the Banking sector.

What the report reveals

The study reveals that while a reasonable effort goes into defining high level requirements, there is very less time and effort that goes into capturing detailed requirements from the very beginning of the project.

Some other key findings of the report show that:

1. Only 50-60% of Business and IT Heads are satisfied with their organizations’ Requirement Management practices
2. Due to poor requirements definition, development time goes up by 25% in transformation projects, and by 19-29% in BAU (Business-As-Usual) engagements

III.        23% of the projects are either deferred or not implemented due to poor definition of requirements

1. A 12% increase in the IT budget is needed to fix these defects originating in the requirements definition and add 10% to cost base
2. Banks spend 5% of their overall IT budget on Requirements Assurance

“This report reveals that over 23% of the projects are either deferred or not deployed due to the poor definition of business requirements—this translates to the amount of money and time that is wasted due to poor definition and management of business requirements. Technology programs have become a priority in every CIO’s agenda today. Therefore, there is a compulsory need for a change in approach to deliver critical quality goals and, business requirements definition management is the starting point”, John Willmott, CEO - NelsonHall said.

Commenting on the report, Surya Vangara, Senior Vice President - Financial Services Business, Maveric Systems said, “Today, less than 10% of the total time is spent on gathering requirements. Instead, doubling this time to say 20% will save up to 35% of the budget that is wasted due to rework caused by poor definition and management of requirements. The math is clear”, he said.

Recommended approach

Data reveals that there is a need for domain-embedded requirements definition/validation tools which will aid in eliciting and defining requirements as well as building an agreement between three key stakeholders i.e. business, IT and the technology vendor, right at the front-end of the program.

Additionally, as these business requirements are extremely dynamic, requirements management and stability of these requirements throughout the lifecycle become extremely critical. This can be done with able requirements management processes and competencies. Maveric has evolved a global standards-based framework, processes and tools that encompasses all the steps involved in Requirements Lifecycle Management