Cost overruns are widespread in software development projects. Though various tools for
risk analysis are in use, a manager still needs a simple and powerful method predicting
success or failure of software projects. This paper proposes discriminant analysis as an
appropriate tool. It has successfully been used for predicting bancruptcy and for credit
contract classification. Discriminant analysis needs predictor variables for assigning a
group classification (successful / failing) to each project. The data base for predictors and
groups was established in a major German company by analyzing 107 software projects.
The discriminant functions calculated can be used as a caveat against cost overruns as
the reliability of failure predictions could be proven to be sufficiently high.