Processes and Tools: The Nuts and Bolts of Project Portfolio Management

Transcription

1 , a wholly owned subsidiary of Forrester Research, Inc. Copyright and Material Usage Guidelines April 11, 2003 Processes and Tools: The Nuts and Bolts of Project Portfolio Management Giga Position Margo Visitacion Portfolio management is an often used and often incorrectly used phrase. There are many practices that actually make up portfolio management: application portfolio management (APM), IT asset portfolio management (ITAM) and, the most commonly known, project portfolio management (PPM). These various methods overlap and produce shared metrics that allow an organization to measure productivity and value. At its highest level, portfolio management takes the output of strategic planning (e.g., initiatives) and integrates it into the IT portfolio with the rest of IT s concerns, capital investments, programs, placeholders for future initiatives, operational investments, etc. While ITAM remains the most common of the portfolio management practices, Giga believes that companies placing equal or stronger emphasis on PPM will reap greater benefits, with cost savings of 25 percent to 45 percent, by reducing redundant work, making better informed decisions and allocating resources more efficiently. Recommendations Implementing PPM is a project, and it must be planned the same way a strategic project is planned: Develop goals and scope, then communicate that information to manage expectations. Before putting any plans into place, determine the goals of PPM e.g., efficient resource capacity management, increased IT reporting value, better balance or projects, etc. For maximum benefit, this should be performed in iterations with regular milestones for review and analysis as a risk-management exercise before implementing future phases. High priorities should be given to developing a project initiation process, consolidation and categorization for early phases. With executive approval, start with consolidation to get the best view of current work capacity. Empower the facilitator of the portfolio to kill redundant or irrelevant projects to get short-term savings. Analyze current projects and organize them based on the company s alignment goals, planning to shift priorities and resource allocations to better balance remaining projects. Newly initiated projects must be held to the same analysis to have the optimum balance. Create policies and procedures as a framework. Having as many standards as possible in terms of documentation, processes and templates ultimately streamlines the introduction and analysis process; however, be careful not to become overly rigid or granular. Allow introduction of changes and deviations; however, do it in a controlled environment to maintain overall balance. Once the foundations of PPM are in place, consider tools: having a repository and analytical tools encourages having the templates and methodology readily available, and it makes analysis more efficient. Base tools selection on maturity and current project management automation levels. Start small, with a controlled pilot, but look out at least 24 months to determine when to make purchasing decisions. Getting the most benefit from PPM requires making the disciplined move to centralized tracking. Proof/Notes Processes In standard operations, communication often becomes fractured between the C-level, lines of business (LOBs) and IT. CxOs and LOBs tend to focus on mainly business issues, while IT is more tactically focused on IT issues. While both sides may communicate clearly during strategic planning, sometime afterward the focus splits back to each Planning Assumption Processes and Tools: The Nuts and Bolts of Project Portfolio Management RPA All rights reserved. Reproduction or redistribution in any form without the prior permission of Giga Information Group is expressly prohibited. This information is provided on an as is basis and without express or implied warranties. Although this information is believed to be accurate at the time of publication, Giga Information Group cannot and does not warrant the accuracy, completeness or suitability of this information or that the information is correct. Giga research is provided as general background and is not intended as legal or financial advice. Giga Information Group, Inc. cannot and does not provide legal or financial advice. Readers are advised to consult their attorney or qualified financial advisor for legal and/or financial advice related to this information.

2 side s respective interests and communication breaks down before actual execution. Possessing both views is critical, but unless they are integrated into a single language, facilitated by services delivery automation tools, this disconnect will continue (see Planning Assumption, Market Overview: Services Delivery Automation, Margo Visitacion and Paul Hamerman). With PPM, using methods and tools helps both sides to speak the same language and have similar expectations. As strategic initiatives become programs and eventually assets or applications, they must be integrated into a common view with ongoing operational projects to maintain balance and improve actual delivery. IT has a lot to juggle. Apart from the strategic initiatives, there are a host of operational and development issues. PPM becomes a critical component in managing all of these needs. Without it, IT becomes reactive and continually pressed for resources and funding working too hard on things that are not perceived as valuable, thus not having available resources for things that are perceived as valuable. To bring more value to the company, work to resolve resource pressures and improve the company s perception of IT; IT must align itself better with the business and, in return, the business must be made aware of the pressures on IT. The Process of PPM Companies embarking on PPM must be aware that this is an evolving, multi-step process. PPM is the exercise that creates alignment; projects are selected to either support strategic initiatives or support operational requirements. To do this, a company must have the most comprehensive view in its pipeline to effectively manage work and resource capacities. Unfortunately, many companies, especially those in distributed or matrixed organizations, routinely have little vision beyond the highest visibility projects. To resolve this, projects must perform several critical exercises to consolidate, categorize and remove redundancies. If a company never ventures beyond these first steps, it will experience up to 15 percent savings; a large multi-national company estimated more than $8 million in savings the first two years of consolidation and removing redundancies. The steps to follow are: Consolidation Create an inventory of the projects you have or know about. Create a single repository for logging all existing projects and for introducing new projects. Organize projects by business unit, size and objective to identify overlaps in execution and resource allocation. Tools are extremely helpful here, but not essential in getting started. Once the inventory is in place, however, tools make ongoing management more efficient. Categorization Create consistent categories to align projects. Be careful not to be too granular in the beginning. Start with high-level categories for initial inventories, e.g., strategic, regional, operational, compliance, research and development (R&D), etc. Removing redundancies and irrelevant projects Compare project objectives, looking to combine similar projects or eliminate redundant projects that can be served by existing projects. Evaluate projects against current plans, kill irrelevant projects and reallocate resources to critical projects to bring them in closer or to assist needed but troubled projects. From these basic beginnings, companies can begin to reap greater benefits by creating balance across the portfolios or categories that match strategic plans or to notify executive teams of any constraints that might require replanning. The following steps should be taken: 1. Organize Aligning projects in categories allows a company to see how work is balanced, e.g., is too much being spent on operational and not strategic projects? This step of continually monitoring for balance not only provides IT a picture of what s going on, but also pushes accountability out to the business, making it a shared exercise in decision-making. Again, tools are not essential here, but having the information available in real time (or as close to real time as possible) makes this a more efficient exercise. 2. Determine practices and policies Create standards for introducing projects (including initiation steps), IT policies concerning feasibility studies, justification and project delivery. Validate policies with business and technical objectives to ensure alignment, adherence to security and compliance. Include project support information, such as project organizational requirements, quality procedures, etc. The goal here is to create Page 2 of 6

3 templates and a methodology to streamline the introduction process. 3. Analyze/measure Once projects have been consolidated and categorized, the next step is determining value measurements required from implementing these programs and what the metrics should be surrounding project delivery. This value measurement includes such metrics as return on investment (ROI) studies for project initiation, revenue (for billable projects) and progress metrics (cost, actuals, etc.). 4. Create visibility Centralized reporting, supported by service delivery automation (SDA) tools, makes this a manageable exercise and allows for better risk management, because with a visual presentation, it s easier to anticipate possible problems. This visibility is critical for decision-making: management must know what s in the pipeline, and having insight into resources and technical assets allows a company to make technical decisions that support future growth while maintaining standards. Finally, this cannot be a static exercise it must be continual. Change is the only constant, and having an outdated portfolio puts a company at risk of wasting money and talent. Using PPM to Put IT Planning Into Motion Integrating PPM into the top-down/bottom-up model of portfolio management brings the most visibility and ultimately value. Management must make objectives clear, actionable and accessible via the portfolio to the LOB and IT for effective planning. As a direct output from strategic planning, PPM can drive the forward-moving projects while balancing the current pipeline (see Planning Assumption, Best Practices and Common Mistakes in Creating the IT Strategic Plan, Marc Cecere). The most critical part of PPM is balance. To get there, a company must have insight into current capacities of resources, funding and workload to compare incoming projects for optimal selection. To create and maintain this balance requires detailed analysis; however, companies must strive, especially in the early stages of PPM, to keep the process straightforward. To ensure the portfolio is focused, keep the following considerations in mind: Visualized objectives Categories that are realistic (refrain from making it too simplistic, e.g., having just strategic and nonstrategic, or making it too complex, e.g., more than five categories or multiple subcategories) Criteria to evaluate incoming projects for selection and placement A realistic prioritization process that applies to all projects and can be applied directly back to the objectives Continually refreshed information to retain balance Goals or objectives and projects are introduced into the portfolio. To standardize evaluation and justification criteria, a robust project initiation process is crucial (see Planning Assumption, Giga s Framework for Project Selection and Prioritization, Margo Visitacion). Based on the company s or division s vision, opportunities are identified for evaluation. Questions must be asked to see if the opportunity fits. The answers decide where it belongs, and then you can see if you have the capacity to take it on now or schedule it for later or determine what must be delayed in order to do a particular project. As shown in the figure below, if the project has been identified as a go, it must go through the prioritization process to determine its place in the pipeline. Projects in action, aside from managing progress, are also monitored in order to forecast when new projects can be started. The active projects are watched to retain balance throughout the portfolio. There are multiple methodologies for this exercise, ranging from financial style planning to scenarios and bubble charts. The actual methodology must be one that is workable for you to meet the expected outcomes (see Planning Assumption, Maximizing Value: Portfolio Management Options for 2003, Chip Gliedman, Phil Murphy and Margo Visitacion). Page 3 of 6

4 Project Portfolio Management Puts Goals Into Action Enterprise view of projects Resource allocation and control Measurement, balance and reporting Business goals: Strategy Objectives Projects Questions: What are we doing? What does it cost? Will it support initiatives? Which projects to fund? Execution: Monitor Measure Deliver Identify Opportunities Assess Fit Analyze Details Prioritize Selection & Action Vision Function/Capacity Balance Source: Giga Information Group To be effective, PPM is a continual process. As noted in the figure above, it s critical as an output from IT strategic planning to get the right projects started. However, continual monitoring is required to maintain balance, and when priorities or situations change, this will allow IT to make educated decisions (rather than just react) that mitigate risk and take advantages of opportunities. At a minimum, portfolios should be reviewed quarterly, although with shorter development cycles, many organizations are opting to review on a monthly basis. Who Owns the PPM? The project office is the natural location for the project portfolio; however, the project office should be seen as facilitators, not the sole owner of the portfolio. Ownership of the PPM is a multi-layered relationship: the contents of the portfolio, and the projects themselves, fall to the project sponsors or executive champions. The portfolio itself is the mechanism that ensures selection and execution; its ownership, like that of the IT portfolio, lies ultimately with the executive committee. The project office provides the information required for decision-making and ensures that the decisions are being carried out. Tools Once the foundations of PPM, e.g., inventory, categorization, basic metrics and project initiation, are in place, companies should consider some form of automation. Keeping portfolios manually is an onerous task, and quite often, the portfolio is outdated as soon as it s compiled. Using an automated PPM application or module allows for real-time analysis and quick notifications in case of issues or changes. Initially, PPM functionality was little more than an automated inventory that displayed tactical progress information in terms of cost and effort; the latest incarnations of these tools have seen broad jumps in analytic sophistication, stronger budget integration and resource forecasting. Even with these across-the-board improvements, there is still a wide variance in levels of sophistication, ranging from strongly strategic analytic tools to strongly tactical tools with predefined reports targeted at organizations with immature or developing skills. The table below offers a comparison of vendor functionality. Page 4 of 6

5 Vendor Functionality Comparison Inventory Tactical Analytics Strategic Analytics Integrated Budgeting Resource forecasting Graphic Reporting Configurable Metrics Integrated PM Planning Integrated Methodology Packaged with Services Artemis Portfolio Director Business Engine Network Changepoint Evolve Lawson Microsoft Niku Pacific Edge Pcubed PeopleSoft Planview Primavera ProSight UMT Source: Giga Information Group Key: = Strong Functionality, = Some Standard Functionality, = Weak or No Offering Selecting Tools There are several options when selecting tools for PPM. Current pain points, tracking methods, organizational maturity and long-term goals should all be taken into consideration. With a wide number of vendors getting into the PPM space, companies have many options and should consider the following: 1. SDA tools If a company already has an enterprise performance management (EPM) or a professional services automation (PSA) solution in place, PPM is usually an integrated component. Functionality here ranges from very tactical progress to somewhat analytic. Functionality should serve all but the most sophisticated users. If a company lacks a centralized tracking and resource management, or reporting is a current pain, consider implementing tools from vendors such as Microsoft, Pacific Edge, Planview or Business Engine to cover both project management at the enterprise/divisional level, then take advantage of the integrated PPM functionality as processes are developed and centralized. 2. Stand-alone tools These tools are best suited to organizations that have basic processes in place and want more sophistication, or those that have an SDA solution that isn t providing enough analytic depth. These tools Page 5 of 6

6 can be used as a stand-alone solution, however, they provide the richest insight when paired with an SDA solution. The analytics for these tools are not for the faint of heart; their complexity is not easily learned without an accompanying services package that emphasis learning PPM best practices. 3. Consulting firms with automated packages Like the stand-alone tools, these are often outside the SDA realm, but instead of the tools driving the engagement, services drive the engagement. Companies wanting a truly integrated services and automation solution should consider this option. Alternative View IT organizations will continue practicing ITAM in greater numbers than PPM. The differences in IT projects are too great to settle on one specific set of criteria for evaluating portfolios, and they will restrict PPM to primarily consolidation and tactical reporting. References Related Giga Research Planning Assumptions Market Overview: Services Delivery Automation, Margo Visitacion and Paul Hamerman Best Practices and Common Mistakes in Creating the IT Strategic Plan, Marc Cecere Giga s Framework for Project Selection and Prioritization, Margo Visitacion Maximizing Value: Portfolio Management Options for 2003, Chip Gliedman, Phil Murphy and Margo Visitacion Making Sense of the Converging Portfolio Management Market, Erica Rugullies and Margo Visitacion Application and Portfolio Management Making the Most of Existing Applications, Phil Murphy and Margo Visitacion IdeaBytes The Project Initiation Process: A Guide to Getting Started, Margo Visitacion Portfolio Management Is More Than Just Management Multiple Projects, Margo Visitacion The Hows of Portfolio Management Are as Critical as the Whats, Margo Visitacion Page 6 of 6