The 10th edition of the annual CHAOS report from The Standish Group, which researches the reasons for IT project failure in the United States, indicates that project success rates have increased to 34 percent of all projects. That’s more than a 100-percent improvement from the success rate found in the first study in 1994.

Asked for the chief reasons project success rates have improved, Standish Chairman Jim Johnson says, “The primary reason is the projects have gotten a lot smaller. Doing projects with iterative processing as opposed to the waterfall method, which called for all project requirements to be defined up front, is a major step forward.”

The Standish Group has studied over 40,000 projects in 10 years to reach the findings.

Project failures have declined to 15 percent of all projects, a vast improvement over the 31-percent failure rate reported in 1994. Projects meeting the “challenged” description—meaning that they are over time, over budget and/or lacking critical features and requirements— total 51 percent of all projects in the current survey.

“People have become much more savvy in project management,” Johnson says. “When we first started the research, project management was a sort of black art. People have spent time trying to get it right and that has also been a major step forward.”

Most of the challenged projects in this year’s survey had a cost overrun of under 20 percent of the budget, a threefold improvement over the first 1994 study. Of all projects with cost overruns, including failed projects, the average project cost overrun in 2004 was found to be 43 percent—versus an average cost overrun of 180 percent in 1994.

The 2004 CHAOS report, entitled “CHAOS Chronicles,” found total U.S. project waste to be $55 billion, made up of $38 billion in lost dollar value and $17 billion in cost overruns. Total project spending was found to be $255 billion in the 2004 report.

In 1994, The Standish Group estimated U.S. IT projects wasted $140 billion—$80 billion of that from failed projects—out of a total of $250 billion in project spending.