Functionality risk in information systems development: An empirical investigation

Functionality risk is defined as the risk that a completed system will not meet its users' needs. Understanding functionality risk is central to successful information systems development (ISD), yet much of the research in this area has focused on identification of risk factors and development of conceptual frameworks. Little is known about how various functionality risk factors collectively influence managers' perceptions about the risk that a project will fail. As organizations become increasingly reliant on software, it is evermore important to understand functionality risk in ISD. In this paper, we develop an integrative model of functionality risk to explain the relative importance of six salient functionality risk factors that have been consistently identified in the prior ISD literature as being important: 1) related technical knowledge; 2) customer involvement; 3) requirements volatility; 4) development methodology fit; 5) formal project management practices; 6) project complexity. The model is tested empirically with 60 highly experienced MIS Directors in sixty organizations. In addition to providing empirical support for the proposed model, the relative importance of each of the key functionality risk factors is empirically assessed. Development methodology fit, customer involvement, and use of formal project management practices emerged as the top three functionality risk factors. Additional finer-grained analyses show that high methodology fit lowers several other sources of risk. Implications for research and practice are discussed.