This short article by Bent Flyvbjerg and Alexander Budzier makes a powerful case that “IT projects are now so big, and they touch so many aspects of an organization, that they pose a singular new risk”. It reports on a project they undertook analysing 1,471 projects,  comparing their expected budget and performance benefits to the eventual reality. While the average cost of these projects was $167 million, the largest project $33 billion. They found an average cost overrun of 27% but a much smaller subset of huge overruns, suggesting a potential for existential risks which are obscured if one merely looks at the averages:

Graphing the projects’ budget overruns reveals a “fat tail”—a large number of gigantic overages. Fully one in six of the projects we studied was a black swan, with a cost overrun of 200%, on average, and a schedule over- run of almost 70%. This highlights the true pitfall of IT change initiatives: It’s not that they’re particularly prone to high cost over- runs on average, as management consul- tants and academic studies have previously suggested. It’s that an unusually large pro- portion of them incur massive overages— that is, there are a disproportionate number of black swans. By focusing on averages in- stead of the more damaging outliers, most managers and consultants have been miss- ing the real problem.

They find that the biggest problems tend to arise when a spiralling IT project compounds the existing difficulties (e.g. “eroding margins, rising cost pressures, demanding debt servicing”) which an organisation is facing, What fascinates me here is the possibility that the IT projects may have been conceived wholly or partially to address these difficulties, instead making them even worse when the implementation of the technology fails.

Given the cash reserves (see below) and/or capacity to raise investment of each of these companies, as well as the practical challenge they face in expanding their markets, it seems likely these nascent infrastructural ambitions will only grow and grow:

Facebook and Microsoft are going underwater.

The two technology companies announced on Thursday they are to install an undersea cable from the east coast of the US to Spain to help speed up their global internet services.

Fast connectivity is particularly important to Facebook, which wants to encourage users across the world to broadcast live video and meet in virtual reality. Both activities can consume vast amounts of bandwidth.

The project marks yet another example where technology companies are assuming roles traditionally left to public utilities or the government, and until now undersea cables have traditionally been laid by telecommunications incumbents. Meanwhile, Google continues to expand Fiber, its high-speed internet program, effectively is building its own postal service, Uber is attempting to replace regulated cab companies and Facebook is bringing wireless internet to Africa.


From Spam, by Finn Brunton, pg 67-68:

The business of phone sex is structured around arbitraging the different settlement rates—how much it costs to call a given country from the United States. A company in the United States leases lines in another country to route the calls and takes a per-minute cut of the settlement rate, with most phone sex calls routed through places like São Tomé, Moldova, and the Republic of Armenia. These millions of minutes of pay-per-minute activity were a significant source of income for the leasing countries: foreign pay-per-call operations were an enormous part of the traffic on Guyana Telephone and Telegraph (GT& T) circuits, for instance, making up $ 91 million of GT& T’s $ 131 million of revenues in 1995, and São Tomé kept approximately $ 500,000 of the $ 5.2 million worth of phone sex calls Americans made via their country in 1993, using the money to start a new telecom system. It is one of those strange macro/ micro moments that will recur on the fringes of spam’s history as lonely, sexually frustrated Americans unintentionally built telephone infrastructure for an island they’d never heard of off the coast of central Africa. 10