Thinking a little more about the situation, consider that the majority of startups fail. I would not be surprised, if one were to take a look at the success rates of internal projects in large companies, to learn that those are fairly low as well. So if the private sector is more efficient than the public sector in IT, the differences are probably more subtle than one would at first think. In both cases you have lots of capital being spent on projects that won't come to fruition. Perhaps the incentives in the private sector are a little better aligned towards a successful outcome.
Yes, it's believed that most of those internal projects fail. Canceled, declare victory because of the internal political stakes but quietly not used (very much), delivered with a fraction of the original features, etc.
For some time I've thought this was one of the primary attractions of offshoring: if you must maintain the pretense of developing new programs and systems, it's a cheaper way to inevitably fail....
Thinking a little more about the situation, consider that the majority of startups fail. I would not be surprised, if one were to take a look at the success rates of internal projects in large companies, to learn that those are fairly low as well. So if the private sector is more efficient than the public sector in IT, the differences are probably more subtle than one would at first think. In both cases you have lots of capital being spent on projects that won't come to fruition. Perhaps the incentives in the private sector are a little better aligned towards a successful outcome.