What Every Project Manager Should Know Trends in Project Governance

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1 Page 1 of 13 What Every Project Manager Should Know Trends in Project Governance Project Management Leadership Conference 2007 Author: Sunil Anand ID: sunil.anand@wipro.com Wipro Technologies 2, Tower Center Blvd, Ste 1100 East Brunswick NJ 08816, USA

2 Page 2 of 13 Abstract: The IT function in any organization goes through continuous changes in its priorities while pursuing better results. The focus on software engineering process models has camouflaged other trends that IT Project Managers need to know about. There are several trends in IT portfolio management and IT project managers need to appreciate the upstream activities that lead to project selection, and expectations being set at that stage. This paper highlights four key trends and how they impact project managers. Knowledge of various portfolio management processes helps project managers to know how decisions are made on resources and funds. These trends are accompanied by investments in technology for better project management and standardization of processes. With a large number of medium and large IT organizations implementing technology-based project and portfolio management solutions, expectations from project managers are increasing. They need to deliver results through improved productivity and greater project success. They also need to relate their projects with business needs better, creating and sustaining a greater degree of IT-business alignment that organizations expect. Introduction: Continuous changes in IT organizations and in the environment impact IT Project Managers (ITPMs) in a big way. Technologies evolve, best practices evolve, and new methodologies emerge. At the same time, expectations from ITPMs are ever-increasing, and their role is seen as much more than someone running their projects efficiently. ITPMs need to scan the environment periodically and evaluate trends inside their organization and in the IT arena. In the past decade, CMM and similar methodologies have got a lot of attention as ITPMs have focused on improving project-management processes, and on trying to ensure that the much-published factors in project failures did not apply to their projects. However, there are other trends that impact ITPMs and do not get noticed. In the last three years, there has been an increasing focus on business-it alignment. In plain terms, the core business groups in any organization pay for the projects done by IT. For example, in a bank, there are several groups (retail, corporate, etc) which are revenue generators. In order to increase their revenues and profitability, these business units demand that IT develop newer applications or modify existing applications. These units provide the funds needed by IT to execute these initiatives.

3 Page 3 of 13 Business-IT alignment is the process through which business units validate that the funds and resources being consumed by IT are indeed in the best interests of the business. A better alignment of IT with business will mean that IT is spending resources optimally, maximizing the value to business. This is achieved by choosing the best-value projects to complete, and by completing them efficiently. As a result, ITPMs are in the midst of major changes in the way their performance is perceived. ITPMs seen as custodians of the organizations assets, namely resources, applications and infrastructure. Trends: There are four key trends all ITPMs should be aware of, in order to stay ahead of such dynamically changing expectations. Trend 1: ITPMs are using more automated tools for managing projects, Work Breakdown Structure (WBS), resources and time tracking Almost every ITPM has used Microsoft Project to manage a project at some time or the other. It is common for ITPMs to use Microsoft Excel as well for tracking tasks. While MS Project and similar software help to manage individual projects, they are cumbersome for "department management" or for managing projects that use shared resources. ITPMs look for more amenable ways to manage their projects and resources. SOS postings on PM web sites asking: Is there a better alternative software package to Microsoft Project? are frequently seen. Two years back, the author attended an IT forum where IT directors showed keenness to move away from such software if they had a better option. This kind of frustration has led to a strong trend towards buying and implementing better project management tools. Figure 1 shows an example of how some ITPMs track resources on multiple projects or time spent by a resource week-by-week. When the project size is large, consuming more than a handful resources, tracking information in this fashion becomes a nightmare, and compiling data becomes error-prone, leading to data-integrity problems.

4 Page 4 of 13 Figure 1: Excel file used for tracking resource utilization on a project Increasingly, large and medium sized organizations have made investments in more sophisticated tools to enable them use technology for better project management. Some of the more common tools seen at organizations now include CA Clarity, Mercury ITG, Planview and Microsoft Enterprise Server. A look at profiles of ITPMs on a jobsite will drive home the point that more than 35% of ITPMs have worked with at least one of these tools. According to a Forrester research survey of 269 IT decision makers in 2005, 83% said they were in the process of adopting PPM (project and portfolio management software) as the way to meet today's challenge of business/it alignment. Some companies are using home-grown project / resource management applications. However, many such companies struggle as investments needed to increase functionality or modify these home-grown application architecture are very high and make such enhancements risky to implement. As a result there is a trend towards selecting COTS (commercial off the shelf) PPM solutions for their project management needs. A case in point is a large financial services company, which is one of the largest worldwide. After toying with the idea of making an $8M investment in building a highly integrated solution from

5 Page 5 of 13 grounds-up, it has now selected a COTS solution to implement. This solution is intended to help its program and project managers to manage projects and resources, while integrating with their HR system and Financial system. Most PPM software are web-based, and provide security-based access to various IT and business stakeholders. They provide for custom-reporting, search, notifications, and other standard features. These tools are viewed as ERP products for IT departments, and have customization capability. Most of these tools can be implemented by the IT organization without external help, by undertaking training from the software vendor. The interested reader can read more about PPM software through reports by Gartner 1 and Forrester 2. PPM tools are often linked with IT governance initiatives. Hence, it is useful to understand the concept of IT governance as something beyond project governance. Craig Symons, Forrester Research, defines four objectives that drive IT governance: IT value and alignment, accountability, performance measurement, and risk management 3. While each of these objectives has far reaching scope outside projects, projects form a microcosm of the IT function. As a result, ITPMs can gain alignment with overall IT and business objectives, if they relate the governance at their level with the concepts in IT governance. Trend 2: PMO leadership and Quality functions in many organizations are championing the usage of PPM tools to track programs, share real-time status on project / program health and make decisions Almost two in three Fortune 1000 companies have invested in at least one comprehensive PPM application. There is increased effort by the IT leadership to involve ITPMs in implementation and usage of PPM applications. Such initiatives are run largely by the PMO (Project or Program Management Office) or the Quality function in the IT organization. The incentive for PMO to run these PPM implementations is to gain control over project status in a timely and accurate manner. As a result of real-time reporting, they expect to make faster decisions to correct problems in project execution.

6 Page 6 of 13 The Quality / IT process engineering function, on the other hand, attempts to use PPM tools as a mechanism to standardize project delivery and bring about adherence to the organization s standards. Both these functions also push this initiative in order to be able to make project and program health visible to the IT leadership and the business. PPM applications also help the IT leadership to review how IT funds are being deployed. By gaining information into the status of project health, they attempt to make course corrections like adding / removing resources. This is an important part of IT portfolio management. One of the most common problems in IT funds management is perceived to be the delay in making decisions about resource de-allocation from low-value projects. By becoming more aligned to business, ITPMs can improve their chances of getting the resources they need. At the same time, they are expected to appreciate the 30,000 feet view of the IT portfolio just like their superiors do, and are expected to make decisions that add value to the portfolio. With transparency of information through PPM tools, ITPMs are expected to demonstrate the maturity to make/participate in tough decisions about when the project is no more valuable and should be scrapped. In his article What's Project Portfolio Management (PPM) & Why Should Project Managers Care About It? Michael Greer, project management trainer, also echoes the need for ITPMs to understand PPM, specifically drawing a linkage between IT strategy and its impact on project managers 4. "Every project manager wants to have enough resources available to complete high-quality project deliverables, on-time and within budget. And every project manager wants to work on projects that are perceived to be valuable and, therefore, enjoy plenty of support throughout the organization. PPM can help project managers achieve both of these visions. Table 1 is an indicative list of activities that ITPMs do, and how PPM tools are changing the way in which these activities are being conducted.

7 Page 7 of 13 Sample Activities Conducted by Project Managers Performs overall project planning based on predefined Charter Coordinates and monitors project tasks and interdependencies Defines, estimates and schedules project work to achieve the scope Manages, monitors and forecasts project execution Takes corrective actions as required to deliver complete scope, as desired quality, in time and within budget (including scope change management, risk mitigation, etc). Monitors project costs and resource usage Ensures internal and external stakeholders management through effective communication Contributes to projects lifecycle improvement through lessons learned, project archives, etc. Traditional Approaches Project planning using MS Project for WBS Manually track task dependencies Excel files to track project estimates Excel files, ppts or word documents for project risk tracking using subjective trafficlight indicators Cost tracking using excel files Manually compile status reports Manually fill and track various templates and checklists Stand-alone time tracking software Newer Techniques Online WBS for project planning Online status updates on tasks Online time tracking Online expense and cost reporting Status reviews with online information access Online risk reporting and tracking Online process control, including checklists and templates Table 1: How PPM tools affect Project Management processes ITPMs are finding more and more that they are asked to use such applications to manage their projects. At the same time, ITPMs need to realize that PPM apps are not the panacea of all issues they face. No PPM technology is perfect, and hence they can expect to be dissatisfied if the expectations are too high. ITPMs need to work with their PMO to ensure that they make the best use of technology and help the IT leadership by using these apps adequately. In return they can expect to gain more control on their resources, and better understand decisions being made by levels above them. At a basic level, an organization deploying PPM tools tries to do one or more of the following in the area of project management:

8 Page 8 of 13 Project Task Management: Digitize the WBS on a PPM tool, or o Maintain MS Project-based WBS and integrate it with the PPM tool Create and manage interdependencies among tasks within the project as well as with other projects Conduct task status updates on PMO tool, or o Update status on MS Project and import information into PMO tool periodically Project Issues and Risk Management: Track project issues and risks on PMO tool. Some tools can provide workflow-based risk /issue management process, including escalations and notifications Project Cost Management: Track project costs on PPM tool, for both human resources and other costs, or o Track project costs on an ERP / financial package, and import/export some information from the PMO tool. Project Resources Management: Manage profiles of resources available to the project on the PMO tool, including skill sets, availability, and allocation of time Receive timesheets through the PMO tool and approve time spent by resources Track resource utilization statistics on the PMO tool Track project health indicators like EV, CPI and SPI on the PMO tool Organizations that already have established time tracking tools prefer to continue using them, and integrate that information with PMO tools for ensuring a single-window to track project status and costs. However, the advantage of having a PMO tool can be reduced by maintaining multiple systems for tracking WBS, costs and time. The organizations which create a single system derive the maximum benefits. Such organizations try to limit integrations to the following areas: Integration with Financial system for internal/ external billing of services Integration with single-sign-on applications for access to the PMO tool Integration with HR system to maintain updated resource profile information The implementation of any or all of the above features results in availability of project information in one system, which helps in governing the project effectively. At the same time, it enables organizations to present program level information without the effort involved in compiling different data points manually. Most sophisticated PMO tools offer the flexibility to define programs on the system and roll up project level costs, utilization, status, risks, etc to the program level. All PMO tools also come with capability to customize views and dashboards to display that information real time.

9 Page 9 of 13 Trend 3: Projects are being asked to follow the gating process right from idea inception, proposal approval, to all the phases of the SDLC In line with the previous trend, the gating process in most organizations has been further strengthened. The key change has been to include the upstream process of ideation and project selection. This inclusion causes a lot of the data from project viability analysis / business case development to be available when the project is being executed. It allows IT leadership to assess the plan versus actual data not just on project resources and funds consumed, but also on the planned benefits vis-à-vis the actual benefits once the project is completed and put into production. Due to the focus on IT portfolio management, IT project managers need to appreciate the upstream activities that lead to project selection, and project expectations being set at that stage. Knowledge of these processes helps project managers to know how decisions are made on resources and funds being made available for their projects. In his article Critical Distinctions in 2004, Mark E. Mullaly, highlights the need for converging project success with investment success 5. In any decision, there are two questions that must be answered: "Why are we making an investment?" and "What is the best means of undertaking the work to realize the investment?" The answer to the first question defines the criteria for investment success, while the answer to the second question provides the base of identifying project success. It is critical for ITPMs to realize that project success without investment success is not an ideal situation. An end-to-end portfolio management process using PMO tools involves the following organizational processes: Budgeting and planning process (for assessing funds available to IT and their allocation) Project identification process (including business case development, risk/value assessment, resource needs and prioritization) Project selection process (based on constraints of funds and resources available) Project monitoring and control (to track plans versus actuals in terms of project resource needs and benefits realized) Some PMO tools can be used to digitize the entire proposal /ideas submission process, and can create a mechanism for:

10 Page 10 of 13 High level business case development Detailed business case development with high level requirements, time constraints and duration, projected staffing costs and benefits Review by business / IT steering committees, along with rating of projects for their business value alignment and risks Portfolio planning and evaluation by IT leadership by developing scenarios and deciding on which projects will be funded By implementing PPM tools, organizations are centralizing the information at one place, even though there may be multiple stakeholders involved in the process from various groups. The IT leadership in most organizations has struggled to gain control on its portfolio, due to lack of defined processes for reviewing project proposals. Very often, the pet projects of business leaders / IT leaders get selected without going through proper reviews. Undertaking the PPM initiative helps to prevent such issues, and also ensure that the right number of projects are selected for execution in a period. By avoiding the situation of taking on too many projects, beyond capacity, IT is able to ensure better execution. Organizations are also digitizing their post-approval project gating process using standard or customized methodologies. This has been a pain area in IT for years, and gets addressed in such initiatives. ITPMs can play a role in providing useful information to the PMO by bringing in suggestions on how such initiatives can be made successful and effective at their level. The challenges ITPMs are likely to face include: Cultural change needed to allow transparency in data shared across the organization Need to agree on broad standardization in spite of the need to have flexibility in project execution Need to comply with digitized processes on PPM tools, even when the tools are not a perfect fit in their context A large majority of organizations use their own custom-methodologies to execute software development. Most of these approaches allow for special treatment depending on the size of the project as well as the technology involved. ITPMs can expect their PMOs to fine-tune and optimize their PPM efforts over a period of 6-12 months to address teething problems.

11 Page 11 of 13 Trend 4: IT PMOs expect to make productivity gains through PPM initiatives This is a trend that is still evolving. As organizations spend millions of dollars in PPM initiatives, they look for real data to prove the value (return on investment) from these initiatives. PPM initiatives promise returns in the following areas: Improved IT PMO productivity, through less time spent in manual project data collection and other project activities Improved project execution (lesser defects) through more transparency Reduced IT costs by scrapping low-value IT projects With the digitization of various IT project management processes, there is better communication of information between various groups involved in the execution. There is less dependence on offline documents on project status, issues, costs, etc, as this information is captured real-time and in one place. Such data is generally more accurate, and does not allow multiple versions to be in circulation. Data compilation is reduced drastically as it resides in one database. Project managers can spend their time on more valuable activities like managing project risks and dependencies. ITPMs can expect to be asked to demonstrate these improvements. Hence, they are likely to be asked to plan less time for project management activities, while delivering better. Conclusion: ITPMs need to look beyond their projects to get a view of the trends in IT-business relationships. The implementation of PPM tools is a major trend that deserves the attention of ITPMs. By being a part of this trend, ITPMs can learn about processes outside project management that impact them and deal with them more effectively. By gaining insights into the various aspects of project and portfolio management, ITPMs can be better prepared to understand the changing dynamics and adjust their approach to project management, giving better business returns.

12 Page 12 of 13 Reference Material: 1. Gartner Magic Quadrant for IT Project and Portfolio Management (PPM) 2. Forrester Wave for Project and Portfolio Management 3. IT Governance Framework Craig Symons, Forrester Research, March 29, What's Project Portfolio Management (PPM) & Why Should Project Managers Care About It? Web article by Michael Greer 5. Critical Distinctions Web article by Mark E. Mullaly, PMP, January 2004 Author s Biography: Sunil Anand heads Wipro's IT governance practice and has helped customers in financial services, manufacturing, entertainment and other industries to develop their governance framework and implement them. Mr. Anand has run several IT projects and programs, and is also a Six Sigma expert. He has worked in management consulting roles, helping customers in India in their strategic planning, operational improvement and cultural change management initiatives. Mr. Anand is a speaker at several forums on IT governance and related topics. He is an MBA from IIM, Ahmedabad and is based in USA.

13 Page 13 of 13 APPENDIX Acronyms: ITPM Information Technology Project Manager PMO Program /Project Management Office PPM Project and Portfolio Management (tools, applications or software) WBS Work Breakdown Structure EV Earned Value CPI Cost Performance Index SPI Schedule Performance Index