10+ Reasons Why IT Companies Fail In Today’s Industries


If you are working in an IT business, you are well aware of the crippling fear factor. It is often a reason why IT companies fail. Especially, if you are the team lead on a project with relatively high requirements. So, as up to 75% of the respondents involved in a study by Geneca agree that software projects are prone to failure right from the beginning. There’s another statistic which proves the same – 9 out 10 startups will fail. Surprising, right?

This puts a big question mark on the project handling capabilities of the team involved, particularly the leadership. But, that’s not the only thing that causes IT projects or companies to fail. It always takes an amalgam of issues from all aspects to contribute towards the whole.

At surface level, you may find some generic reasons to be the root cause, but there are a whole plethora of elements that build up only to crash your IT Company. Having said that, let’s have a look at why IT businesses fail and what you can do to prevent it:

1. Unclear Goals and Objectives

why it companies fail

In my opinion, the number one reason businesses — IT and non-IT alike, fail is because of unclear project goals and objectives. If the project goals are not properly formulated and communicated from day 1, there will be problems – lots of them.

According to PMI, a lack of clearly defined goals is the most common reason for project failure (37%). This single stat in itself should be enough to portray the significance of strategic planning.

If you think you can just wing your way through your project with some vague goals in sight – you’re so wrong, my dear friend! You may not realize it, but this is where the problem lies. Poor planning – or lack thereof, will start a chain reaction of unfortunate events that will have a domino effect on your performance.

So, to reduce your chances of failure, start by devising a clear project plan. Map out SMART goals and objectives in a way that they can be easily shared with your team too. Doing this will set the right course of what’s supposed to follow and will serve as a solid foundation to build your IT business empire.

2. Poor Leadership Structure

Another prime reason for IT companies’ failure is poor leadership. Leadership qualities of a person directly impact the employees’ performance. Their productivity, overall mood of the team, their engagement, and the effort they’re willing to put in – all are dependent on the leadership style. Better leadership will lead to better results and ultimately, satisfied clients.

If you consider the stats for the failure of projects mentioned above, there is no need to explain that the cost associated with them is also staggering. Watching all that money going down the drain will surely pain you a lot.

Learn from great leaders and what they’ve been practicing to develop exceptional leadership skills. Work on them and you won’t have to worry about failure.

3. Occasional Lack of Resources

One of the common reason why IT companies fail is a lack of resources. Often, companies have what they need to kick start a business or a project, but it’s not enough to keep it going in the long run. This holds for all kinds of resources – financial, human, technological, etc.

Before jumping on to the decision of moving forward with a project, make sure you have an adequate amount of resources required to pull it off till the end. Make amendments on the way if needed, but never allow your company to reach a point where you’ve run out of any one kind of resource. This will have a similar domino effect, with everything falling apart right in front of your eyes.

When it comes to human resource management, the criticality of effective management is equally important. For this purpose, you can deploy a professional resource management software to make things convenient for you. With the right software at hands, the chances of mismanagement are reduced to a minimum and all the operations are streamlined just the way they should be.

4. Poor Resource Management Skills

why it companies fail

Just having the right and sufficient resources are not going to do the job for you. If you don’t have what it takes to manage the resources at their best, your company is prone to failure. At this point, let’s take resources as your employees. If task allocation is poor, it directly impacts the productivity of your team and takes a toll on their performance – decreasing the chances of success.

As mentioned before, think about investing in a powerful (or not so powerful – your call) resource management software to get things done for you. You’d be surprised at how smooth your resource management gets, taking away all your stress for good.

5. Lack of Budget/Capital

Lacking sufficient budgets or capital is quite an alarming situation for an IT company. It’s directly proportional to the amount of progress you can make over time. Whether you have investors funding your projects or personal funds for serving the purpose, lack of them at any point will put the management of day-to-day operations in jeopardy.

Not only this, but lack of budgets also shows that the company is unable to pay back its debt/loans, and other kinds of financial commitments. This is why special attention needs to be given to budget allocation and overall company expenditure.

If you can’t do it on your own, hire a financial management expert and let him/her do the job for you.

6. Lack of Expertise

why it companies fail

A general lack of expertise when it comes to handling projects holds a big chunk in the pie of reasons why IT companies fail. While it’s important to acknowledge the fact that not everyone possesses all the skills you need to run an IT company – you can still develop many of them over time.

Lack of expertise brings with it the general inefficiency to tackle project risks and perform spectacularly. Plus, you can’t foresee the issues that might arise in the future, resulting in poor strategic planning. Therefore, having expertness of the given field paves way for better project performance.

Possessing expertise doesn’t necessarily have an individual face. If you have a bunch of individuals – each having expertise of their own – at your disposal, your work is pretty much done here. You just need to focus on honing this expertise for mutual benefit, and voila! The recipe for success is right there in your hands.

7. Poor Communication

Next up in the list of top reasons why IT companies fail is poor communication. Whether the team is working remotely or is at the same location, cultivating a culture of streamlined communication is the responsibility of a project manager.

It would surprise you that 59% of the workers in the US reportedly said that communication is their biggest hurdle in success. That tells you the significance of healthy communication within the company.

When employees know they can openly communicate their point of view, without any fear of prejudice, things start falling in place. Whether you agree or not, companies always need people who can get their point across fearlessly and openly – without compromising ethics, of course.

With that being addressed, put a team collaboration tool in place and provide a central location to your employees for communication. That way, you’re not only providing a medium for centralized team communication but are also formally keeping track of everything being discussed around.

8. Not Focusing on Client/Customer Requirements

why it companies fail

When it comes to specific IT projects, clients’ requirements set the course for the next action. We don’t need to convince you of that. It’s pretty evident. However, many IT companies fail to take this very thing into special consideration and deviate from what the requirements were in the first place. Hence, setting the tone for project failure right from the beginning.

The old saying, ‘customer is the king’ is not merely a fancy quote signifying the status of a customer. It holds for every service-based company. If a customer keeps you in business, he/she can put you out of one too. To succeed, you need to develop your buyer’s persona first and then get to work. Go out (not literally – use technology), ask questions, be open to skepticism, and then work your way around in the market.

Running a deep evaluation of your clients’ requirements before starting your work will save you a lot of trouble revolving around the classic trial-and-error. It will also help you focus on your project goals efficiently and deliver responsibly.

9. Inability to Learn from Mistakes

When Winston Churchill said, ‘All men make mistakes, but only wise men learn from their mistakes’, he wasn’t kidding you know! As much as it sounds clichéd to you – accept your failures and learn from them. Acceptance is the first step towards a successful business. No, just accepting them won’t do it. Figure out what exactly went wrong, so you can prevent it the next time.

All the famous personalities have been screaming their hearts out about learning from your mistakes. It’s not coming out of anywhere, of course. The notion behind this crazy buzz word (or statement) is only to make your company perform better over time. Your past decisions should serve as a guide for improved present and future decisions.

10. Failure to Implement Professional Tools

Last, but not the least, because there can never be enough reasons why IT companies fail, is the inability to properly implement professional tools. Many times, teams have all the right tools and resources available, but they lack the brains to utilize them appropriately. As much as these tools are deemed necessary for project delivery, utilization to their full potential holds equal importance.

One way of ensuring this is to hold workshops or professional training sessions for all the concerned team members to help them get a hang of what they’re about to experience. You can also hire trainers to give on-the-job training to everyone involved and help them get some hands-on experience of running software.

When it comes to individual projects, you can install project management tools to give you an overall coverage and keep track of your progress. There is plenty of free software available on the internet, in case you want to experiment first and then deploy.

What you need to keep in mind though is to not blindly jump on the bandwagon of opting for a famous project management software. Carefully analyze your team needs, what exactly you want to be done with the tool, and what’s your budget – then go for it!

In Essence, It’s all About…

The list for the reasons of why IT companies fail is a never-ending one. The trick here lies in identifying your strengths and working on the weak areas. When you’ve figured that out, you know exactly what to work on and how.



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