In-Depth

Project portfolio managment promises to step up to the ROI challenge

• By Colleen Frye
• December 1, 2004

A few years ago, the IT department of Oakland County, Mich. was forced to cut $1 million from its budget. The IT team sat down with its customers from the county’s various departments, gave everybody a report on the county’s portfolio of IT projects, and made those cuts in just two hours.

"We walked into the leadership group knowing how many people we were going to lose, which equated to a budget number of one million dollars," explains Phil Bertolini, director of IT. "We looked at the costs of doing business, plus support and maintenance costs, which were fixed labor. Then we looked at the discretionary dollars [and] the investments that equate to new development projects. We were fully booked; we had to cut a million dollars out of these projects."

Bertolini and Janette McKenna, chief of IT internal services, attribute the ease of this decision-making process to the county’s project portfolio management (PPM) system. "We knew what we had in our portfolio," says McKenna. "Our customers prioritized their own projects and made their own cuts. We knew exactly to the hour the resources needed for each project, and we were able to make that reduction to plan effectively for what we had to do. We had standards and processes and procedures wrapped around us, and our customers were trained in project management methodology so they could help us make those reductions."

It wasn’t always that straightforward at Oakland County, and the relationship between IT and its customers wasn’t always amicable. Before IT established a project management office (PMO) and brought in a PPM solution from Niku Corp. to manage its portfolio, "we had 900 pieces of paper sitting in piles, and customers’ programs weren’t being created," Bertolini says. "There was a feeling IT couldn’t deliver."

More organizations are looking to implement integrated PPM solutions, according to technology researcher Gartner Inc. In a recent report, Gartner defines PPM solutions as those offering integrated functions for managing the time, costs, and resources associated with IT projects throughout the enterprise.

Some PPM solutions may also offer workflow and process management, collaboration, and content management.

Increasing impatience with the iron triangle
Oakland County at the time typified a longstanding problem: IT departments needed better project planning management and governance, and projects needed to align more closely with business priorities. These drivers, as well as new regulatory compliance needs such as Sarbanes-Oxley are pushing the project and portfolio management market forward.

"I think there’s a desire on the part of both IT and business to have it all," says Matt Light, a research director at Gartner. Traditionally, with what Light calls the "iron triangle" measures of time to market, quality, and cost, IT could never deliver all three.

"If you wanted fast and cheap, it couldn’t be good," he explains.

These days, there is increasing impatience with that. Consequently, Gartner forecasts new license revenue for PPM tools to grow to almost $400 million in 2004, up from $361.8 million in 2003. Tools for the right stuff PPM solutions promise an ROI on both the cost savings and the revenue sides. On the cost savings side, implementation of a PPM solution can help IT organizations reduce the number of cancelled or failed projects, more accurately estimate jobs and maximize resources, and reduce project administration costs. On the revenue side, PPM tools can help IT and business units identify and prioritize projects that will increase revenue and provide competitive advantage.

"The tools help you work on the right stuff," Light says. "Most have some frontend facility to compare competing project proposals and try to arrive at the right portfolio mix. There seems to be a strong correlation between good portfolio planning and improved profitability."

So the competitive advantage can be twofold: better strategic alignment with business, and better tactical control and ITgovernance.

However, the payback is not a sure thing, and the investment is not insignificant — the cost of a PPM solution can top $1 million, depending on organization’s size and complexity.

"In the hype cycle, we put PPM applications pretty high up," Light says. "Some folks are expecting their portfolios are going to be perfected, and they’ll hit just the right opportunities and execute them perfectly just because they buy a tool. If they do all the appropriate things around the tool, many of those things will be realized, but you won’t get payback within a year most of time. But depending on how bad the situation was, payback in two to three years is not at all unusual."

Expensive, but worth it
As Light stresses, payback depends on proper use of the PPM tools. At John Deere Health, the managed health care organization owned by the manufacturer of heavy equipment based in Moline, Ill., the goal in 2001 was to bring in a tool that would allow project managers to manage projects as well as resources, says Mike McCollum, a business systems analyst in the project management office. The IT organization implemented PlanView 7.0 in October 2001. Since then, IThas rolled it out to 145 users, including 50 project managers.

"It’s a major capital investment, but there’s a lot of value with the tool — being able to determine right work to bring in the most value, that almost justifies the cost alone," McCollum says. However, "the way we rolled out, we probably have not seen any payback, and that’s our fault."

McCollum says, "We rolled it out, we told people to go use it, and people kind of expected it would take care of itself."

The biggest issue, he says, has been getting people to enter accurate information about their time every day, rather than relying on their Outlook calendars and updating PlanView at the end of the week. McCollum is not giving up, however, and plans an upgrade to the new version of the PlanView Portfolio Management Software and PlanView’s PRISMS for IT Governance and Resource Management.

"My goal with the new version, and the IT governance piece, is that we want to enforce our delivery process. To be Sarbanes-Oxley ompliant, we want to show we have repeatable, documented, and measurable processes. Through workflow and lifcycles, I can enforce our system delivery process; you can’t go to another stage until you have the set of documents we require, so I can control the governance."

McCollum says PlanView will be reintroduced to users, stressing the reasons for doing things right.

"We want to make sure things we do bring value and align with the strategic plan. A lot of departments have internal initiatives, but there may be other things we should be spending our time on. The system will make that more obvious."

A tool with a view
As McCollum and others have learned, successful project and portfolio management requires more than choosing the right tool. Some key questions an organization should ask, Gartner’s Light says, include: "What is the organization’s readiness to adopt PPM disciplines versus the tool? How advanced are project processes? In general, the tools have become more usable, and the leading tools have become more configurable, but they are also preconfigured out of the box for different roles in the project environment. They are not just tools for the project scheduler anymore; they’ve got a view for a team member to log issues, a view for the resource manager, for the business unit sponsor, for the executive stakeholder."

Shelley McIntyre, vice president, business technology services-IT, at Guardian Life Insurance Company of America, agrees with Light.

"Assess your organization around project management maturity,' she says. 'Don’t assume your project managers have the ability to absorb the process and the toolset. And once you assess that level, set it with management so expectations are set around compliance, not just for the tool but for the processes and governance."

McIntyre speaks from experience. Her organization piloted Primavera Systems’ Primavera 3.5 in February 2001, at the same time it was building Guardian’s first PMO.

"If could do it over, I would make sure the PM community had all the proper project management foundational training from a process standpoint, was attuned to that, and then introduce the tool. We introduced both at same time."

Depending on their level of maturity, says McIntyre, some people were overwhelmed by the process changes.

There was also cultural resistance. Nonetheless, McIntyre says the organization has reaped benefits. This year, the firm is using Primavera to manage 370 active projects. It is used by project and resource managers, project leaders, and senior leadership. The system is integrated with Guardian’s general ledger so all billing is automatically sent to the GL. It is also integrated with the Business Objects reporting tool. Guardian plans to upgrade to version 4.1 by year-end.

Handle on resource management pays off
McIntyre says the use of Primavera software provides a competitive advantage for her company.

"We have real-time information at the enterprise level; we have the ability to make informed decisions just in time. As for ROI, we think we have a much better handle on resource management," McIntyre says. "We drive the resource planning with data that comes out of Primavera. There are no statistics, but we know on-time and on-budget percents are on the way up. The tool is instrumental in the budgeting process, so we’re aligned and not working on projects we shouldn’t work on. And, given direct integration to the GL, we’ve improved the invoicing process and chargeback process to the business units, and it all ties right to the project."

Although good PM processes and methodologies are important, Gartner’s Light stresses organizations need to apply "just enough process." For example, he says, "for a lightweight RAD project, you don’t want to use a sledgehammer methodology. Folks have tended to not be flexible in terms of process. These [PPM] applications can help simplify that, and in general make it easier to apply just enough process to projects."