Cost associated with project failures in a strategic area of IT applications has increased exponentially in the US, with more than half of such projects resulting in failure. Projects contributing to failure costs are those “that continue to absorb valuable resources without ever reaching their objectives, and represent what can be described as escalation”. Escalation occurs when attainment of project goals seem to be uncertain yet there is commitment to continue (Kiel, 1995).Factors associated with project escalation are classified into four categories; project, psychological, social and organizational. Project factors include underestimation of required resources, inadequate planning and improper monitoring. Psychological factors include decision maker’s perception that success is around the corner based on his previous experience. Social factors include a feeling that abandoning of the project may look bad amongst other social groups and organizational factors include unstinted support and involvement by a key decision-maker in the top management.ReportRole of Information Technology in building competitiveness in business is becoming more dominant. US companies continue to deploy huge resources in IT projects to improve business processes. A major problem faced by companies is the frequent occurrence of IS project escalations, resulting in huge wastage of critical resources. Project escalation occurs when there is continuous commitment of resources to it even when there is uncertainty in attainment of project objectives.Studies have indicated that escalation is not caused just by defective project management but is also a result of combination of psychological, social and organizational factors. Factors under each category need to be understood and addressed by IS managers.Project factors: the duration of the project should be worked out correctly and underestimation should be avoided. The nature and amount of resources necessary for the successful completion of the project should be estimated accurately. Scope of the project should be very well defined; the project should be well planned and be accompanied by proper control measures so that deviations can be corrected as they occur.Psychological factors: association of an IS project with a single individual in an organization should be avoided. Collective authority and responsibility of a project will help decision making, with respect to dropping a non-viable project in time, more rational.Social factors: IS projects should be a team effort. When IS projects are allocated to a team representing all the related departments the project can be completed more effectively and efficiently and will help reduce intrafirm rivalry.Organizational factors: these factors are more difficult to address as they involve bureaucracy and power play amongst managers in any given organization. The problem can be overcome by strong leadership at the very top. The leader has to create a culture of goal integration within the organization.BibliographyKeil M (1995) “Pulling the plug: Software project management and the problem of project escalation.” MIS Quarterly, Vol. 19, No. 4, pp.421–447.