New Research Report Sheds Light on the Lifespans of State Digital Investment Projects

In a new research project for the Concept Research Program at the Norwegian University of Science and Technology (NTNU), Vista Analyse has examined the lifespans of state ICT investment projects. The project has been carried out in collaboration with ICT experts from Analysys Mason and Metier.

In project assessments, it is crucial to know how long capital can remain in operation and retain economic value in use. This knowledge is applied, among other things, in cost-benefit analyses and in the practical planning of operations, maintenance, reinvestments, and more. The study examines state digital investment projects, in the form of both digitalization initiatives and digital infrastructure projects.

“It has been fascinating to delve into the lifespans of digital investment projects and related issues. On behalf of the project team, I would like to thank Concept for excellent cooperation and all our informants for their contributions,” says partner and project manager at Vista Analyse, Rasmus Bøgh Holmen.

The Study Provides Detailed Insights into Project Lifespans

The study is based on a composite methodological approach combining literature review with macro statistics, accounting rules, public guidelines, expert interviews, and project data. The empirical analyses indicate that digitalization projects currently under implementation have an average lifespan of around 12 years, while the corresponding average for infrastructure projects is 17.5 years. For projects not yet initiated, the estimates suggest an expected lifespan of around 15 years for digitalization projects and approximately 17 years for infrastructure projects. Expert interviews point in the same direction, but with greater variation: under normal conditions, the lifespan of digitalization projects is estimated at between 10 and 15 years, while in particular cases it may range from 5 to 20 years. For infrastructure projects, expert estimates mainly fall within the interval of 15 to 30 years, with an upper range of up to 40 years.

Both the research literature and accounting standards show that individual components in digitalization projects often have lifespans of less than ten years, while telecommunications infrastructure is generally assigned significantly longer lifespans, typically between 20 and 40 years. Macro statistics and accounting rules suggest even shorter lifespans for certain ICT components, with estimates of 3 to 5 years for software and 4 to 7 years for IT equipment. Public guidelines generally recommend lifespans in the range of 5 to 15 years for digitalization projects, while the Digitalisation Agency operates with somewhat higher estimates of 15 to 20 years. For infrastructure projects, guidelines and regulations allow for lifespans in the order of 20 to 50 years.

The Study Contributes to a Comprehensive Understanding of Project Life Cycles

The study also sheds light on the life cycles of both digitalization projects and digital infrastructure projects. It examines how project lifespans develop over time, the importance of reinvestments, and the shape of depreciation paths, which reflect how the usefulness of capital tapers off over time. The authors have also examined what influences project lifespans and whether a project succeeds or fails.

The risk of failed projects is significantly higher for digitalization projects than for infrastructure projects. Digitalization projects have a 30 to 60 percent probability of negative net benefits and a 10 to 25 percent probability of collapse, while infrastructure projects rarely fail. Failure risk in digitalization projects often stems from organizational rigidity, lack of competence, and supplier dependency.

New Recommendations for Assessment Practices and Research in the Digital Domain

The report recommends that lifespan should be calculated from the time the project is put into use, even if the investment phase has not yet been completed. For digitalization projects, it is also crucial whether projects make it through their “infancy period.” Expected lifespan should be set to 10 to 20 years for digitalization projects, with 15 years as the standard, and 15 to 40 years for infrastructure projects, with 20 years as the standard. The authors have also mapped more detailed lifespans for digital components in investment projects, which can serve as a reference tool.

The authors recommend introducing uncertainty analyses and considering reinvestments in order to optimize lifespan. Finally, they point out that future research should focus on agile financing models, optimization of lifespans, and factors that influence project outcomes.

Want to Know More?

You can read the research report here. Please contact Vista Analyse partner Rasmus Bøgh Holmen if you have any questions.