WHITE PAPER PROJECT PORTFOLIO MANAGEMENT VS PROJECT ERP

WHITE PAPER PROJECT PORTFOLIO MANAGEMENT VS PROJECT ERP

CONTENT ALPHABET SOUP... 1 A CLEARER PICTURE... 2 ALL TOGETHER NOW... 3 CONCLUSION... 6 DEFINITIONS... 7 ABOUT IFS... 8

PROJECT PORTFOLIO MANAGEMENT VS PROJECT ERP BY KENNY INGRAM GLOBAL INDUSTRY DIRECTOR IFS AB What is Project Portfolio Management (PPM) software? How does it deliver value to a project-driven enterprise in a way that is different from enterprise project management (EPM) or even a good project-driven enterprise resource planning (ERP) application? At IFS, we see all of these solutions as complementary and, ideally, part and parcel of a single project-based solution. Yet various vendors sell standalone PPM software, standalone EPM software and standalone ERP. Each of these applications must then be integrated in some fashion through a complex, risky and extremely expensive development project in order to provide an enterprise computing environment suitable for a project-driven manufacturer, engineering procurement and construction contractor, offshore drilling operator or other project centric business. In this whitepaper, we will explore the differences between PPM, EPM and Project ERP. We will then discuss the ideal state of a single ERP application capable of uniting all three approaches to enterprise software in a single system. After all, if a single application can fulfill the roles of three separate applications; this can mean substantial savings in software licensing costs. Additional benefits will be realized through enhanced interoperability and visibility across the enterprise into specific projects and activities. ALPHABET SOUP The enterprise software industry is rife with three letter acronyms (TLAs). And PPM and EPM are only the tip of the iceberg. PPM can also stand for Program Portfolio Management or Product Portfolio Management. And EPM can also stand for Enterprise Program Management. These differently-named offerings may even be sold by the same vendor! This, to say the least, is confusing. So to help sort things out, we consulted ARC Advisory Group Senior Analyst Dick Slansky, an expert on project management and project management software. 1

In our recent podcast, Slansky suggested that the underlying PPM and EPM solutions are essentially the same, but that vendors use different names for them depending on the industry to which they are trying to sell them. You ve got all these different offerings that get turned around and relabeled probably based on what the product is and how they are trying to market it, Slansky said. Another way to look at these definitions and how they are used is based on the industries that use them Some companies are very program-driven and thus project-driven. So there would be elements of engineering organizations, and the projects that move through those engineering organizations. Whereas another company can be very ERP-centric, and their focus could be on the portfolio management at a higher level. According to Slansky, certain terms and definitions are more often used in different verticals. An engineering, procurement and construction (EPC) company is very much project-driven, and use complex project management tools. Portfolio management may more often be associated with a manufacturing company that makes products. So they are managing a portfolio of product lifecycles. Across the spectrum of IFS customers, we see the most intense interest in portfolio management software among companies deliberately selling and managing discrete projects and those involved in managing portfolios of sizable and expensive capital assets. A homebuilder or EPC contractor will have an obvious need to manage a current and future project portfolio. And a utility company or large scale property developer or process manufacturer will need to manage their investments across a portfolio of assets to ensure maximum return on capital. These asset-intensive companies may be the most interested, today, in portfolio management. And among these companies, as Slansky suggests, there is no consistent terminology. The way we see things at IFS, portfolio management, be it across products, projects or programs, really involves similar functionality aimed not at day-to-day project management of milestones, resources, people and deliverables. Rather, it is designed to handle the overarching project, program or product environment including current and future needs and demands on resources. A CLEARER PICTURE So it becomes apparent that PPM is different from an execution-related application like EPM in that EPM is designed to facilitate day-to-day project delivery and project management. PPM, in its various incarnations, provides visibility into performance, risk profile and resource demands of current projects, but also projects that are being bid, sold, or will start at a future date. This allows senior management to marshal the appropriate resources to ensure that commitments can be met and the business is on track for growth projections. Popular definitions for PPM suggest that it would encompass the following: 2

Pipeline Management Resource Management Change Control Financial Management Risk Management All of these functions are highly desirable for an organization with multiple, missioncritical programs, projects or product management processes. But how well does it meet the needs of day-to-day project management? Comparisons between popular PPM products and project management tools suggest that many PPM tools have gaps in the area of actual project management. PPM software may not support things like milestones, Gantt charts, budgeting, calendars and time sheets required for day-to-day project management. This is the strength of EPM managing activities, schedules and work breakdown structures. Multiple projects would then be aggregated and consolidated in a PPM solution in order to manage the overall priorities of the organization. Oftentimes, software users may find themselves exporting data back and forth between separate EPM and PPM applications. But where does that data originate from? Where is most of the work performed? What is the true system of record for the company? More often than not, that is an ERP application. ALL TOGETHER NOW At what point can a single application, that ERP system of record, deliver both EPM and PPM functionality? This singular, unified approach is desirable because projects do not happen in an organizational vacuum. Projects can impact the organization from a financial standpoint, and many organizations do integrate a project management application with their ERP from a financial standpoint. But what about other dependencies between the project and the rest of the enterprise? How are those accounted for? Someone managing an enterprise project may need visibility into human resources to evaluate the skills and competencies of your resources, often across international boundaries. How does a project manager get that global view? Inventory and supply chain management is also critical to the timely completion of projects, and even if a project management tool includes inventory management functionality, it is duplicating functionality and data from a separate ERP application. Moreover, project managers probably have enough details to track without taking on roles that ought to be performed by the purchasing or supply chain departments. 3

So it becomes apparent that a strong project-oriented ERP application may be more attractive than separate ERP and EPM applications. But what about PPM? Can ERP also encompass the functions of a portfolio management solution? Can it take into account financials in such a way as to managing risk and the financial resources of a portfolio of projects? The answer to that question is yes. Can an ERP system support all this well yeah, Slansky said in our podcast. ERP has become way more than just kicking out a shop order at the end of the day. It has become, to use the term, this portfolio of products that can be very projectdriven. PROJECT NAVIGATOR IFS Applications offers Gantt views of your projects results in more efficient management of the critical path. PROJECT PERFORMANCE IFS Applications gives you the ability to analyze your project portfolio to allow strategic decisions to be made. 4

At IFS, we have certainly had a front row seat for this growth in the scope of ERP product offerings. Over the last decade, we have added extensive project functionality, not only just to execute work on projects, but to offer different views of the project on an individual and portfolio perspective. Because a project manager will want to manage immediate priorities; what activities are due to happen by whom and when. Finance may want to take a slightly different view to determine where costs and revenue recognition is going to occur. We have also developed and included corporate performance management, which expands IFS Applications further into the realm of PPM. CPM allows IFS Applications users to align the business strategy fully from PROJECT BUDGETING Cash flow across your project portfolio is critical, and IFS Applications gives you real-time details of future as well as current and past cash flow. RISK MANAGEMENT Management of risk across your projects is key to ensure that any actions are dealt with in a timely manner. IFS Applications offers powerful visibility into enterprise risk. 5

end to end within the solution so that if anything is going out of kilter or is not meeting the overall strategy and objectives of the company, it will be flagged. This inclusion of portfolio level management and visibility may be fairly unique in the market. Many of our customers are in high-risk industries like oil and gas and engineering procurement and construction contracting or in fields that require heavy project accounting like aerospace and defense. Managing risk is essential in these challenging environments. And running multiple projects that can all contribute to project risk means that management must be able to determine current risk levels as the project portfolio changes. In a powerful project ERP application like IFS Applications, executives can determine what level of risk is acceptable to the organization. And then they can rely on the IFS Corporate Performance Management module to evaluate the risk profile of the mix of projects currently underway as well as those in the future. This degree of what-if and predictive analytics capability is essential to a project- or program-driven organization, and therefore ought to be included in ERP. CONCLUSION The distinction between EPM and the various facets of PPM should be relatively clear. EPM supports day-to-day project management. PPM supports overarching management of current and pending projects. Definitions become less clear as we look at the role that ERP can play in delivering the functionality of PPM, EPM or both. Certainly, not every ERP product will be project-centric enough to replace or eliminate the need for standalone project software. But project-driven organizations may realize more streamlined operations and lower total software license costs by selecting and implementing ERP that can meet most or all of their project and portfolio management needs. As IFS Global Industry Director for Project-Centric Industries, Kenny Ingram is intimately involved with industries including Construction, Contracting, Engineering, Infrastructure and Shipbuilding, Oil and Gas, Energy, Utilities and Defense. Ingram has been with IFS for 16 years and has worked in the business systems marketplace for over 20 years. He holds a BSc degree in Technology and Business Studies from the University of Strathclyde in Glasgow. 6

DEFINITIONS EPM SOFTWARE Management of a single project life cycle focused on work management, milestones, commitments and marshaling appropriate resources. It is essentially a tool for execution of projects involving people in multiple departments, locations or companies. PPM SOFTWARE Management of the current and proposed costs and other impacts of a number of enterprise-wide projects. PPM may or may not include various elements of EPM designed for day-to-day project management, but will be designed to encompass not just current but future, proposed or pending projects to enable strategic organizational and risk management. PROGRAM MANAGEMENT Management of groups of projects or other tasks in order to ensure specific outcomes. Program portfolio management and project portfolio management may seem to overlap. But a strict definition of program management would stress that projects relate to series of individual tasks. These projects may be necessary for program success. So for instance, construction of a new manufacturing facility may be part of an overall program to increase market share by reducing stockouts caused by lack of manufacturing capacity. PORTFOLIO MANAGEMENT At a high level, portfolio management can refer to management of a mix of any number of items or processes, ranging from projects, products programs or even assets. The goal is to ensure the overall spectrum of activities, including cost, deliverables and risk profile, matches what is acceptable to the organization. PROJECT ERP Sometimes referred to as Project Based Solutions (PBS). Enterprise resource planning (ERP) software designed to manage both projects and the overall performance of a projectdriven organization. Project ERP may encompass both EPM and PPM in a single application. It may also offer deeper project integration with supporting functionality including finance, human resources and inventory/supply chain management. WORK BREAKDOWN STRUCTURE A management approach that divides a project up into manageable, discrete tasks with distinct timeframes, deadlines and resources assigned to them. Originating in the defense industry, WBS functionality is now used in a number of project-centric industries. CORPORATE PERFORMANCE MANAGEMENT An approach to business intelligence designed to track and monitor an organization s performance across established KPIs. In a project environment, these KPIs may include key project-related metrics or risk, cost or revenue profiles across portfolios of products, projects or programs. 7

ABOUT IFS IFS is a public company (OMX STO: IFS) founded in 1983 that develops, supplies, and implements IFS Applications, a component-based extended ERP suite built on SOA technology. IFS focuses on agile businesses where any of four core processes are strategic: service & asset management, manufacturing, supply chain and projects. The company has more than 2,000 customers and is present in 50+ countries with 2,800 employees in total. More details can be found at www.ifsworld.com. For further information, e-mail to info@ifsworld.com AMERICAS....+1 888 437 4968 ARGENTINA, BRAZIL, CANADA, MEXICO, UNITED STATES ASIA PACIFIC... +65 63 33 33 00 AUSTRALIA, INDONESIA, JAPAN, MALAYSIA, NEW ZEALAND, PHILIPPINES, PR CHINA, SINGAPORE, THAILAND EUROPE EAST AND CENTRAL ASIA...+48 22 577 45 00 BALKANS, CZECH REPUBLIC, GEORGIA, HUNGARY, ISRAEL, KAZAKHSTAN, POLAND, RUSSIA AND CIS, SLOVAKIA, TURKEY, UKRAINE EUROPE CENTRAL...+49 9131 77 340 AUSTRIA, BELGIUM, GERMANY, ITALY, NETHERLANDS, SWITZERLAND EUROPE WEST...+44 1494 428 900 FRANCE, IRELAND, PORTUGAL, SPAIN, UNITED KINGDOM MIDDLE EAST AND AFRICA................................................+971 4390 0888 INDIA, SOUTH AFRICA, SRI LANKA, UNITED ARAB EMIRATES NORDIC...+46 13 460 4000 DENMARK, NORWAY, SWEDEN FINLAND AND THE BALTIC AREA.... +358 102 17 9300 ESTONIA, FINLAND, LATVIA, LITHUANIA www.ifsworld.com THIS DOCUMENT MAY CONTAIN STATEMENTS OF POSSIBLE FUTURE FUNCTIONALITY FOR IFS SOFTWARE PRODUCTS AND TECHNOLOGY. SUCH STATEMENTS OF FUTURE FUNCTIONALITY ARE FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE INTERPRETED AS ANY COMMITMENT OR REPRESENTATION. IFS AND ALL IFS PRODUCT NAMES ARE TRADEMARKS OF IFS. THE NAMES OF ACTUAL COMPANIES AND PRODUCTS MENTIONED HEREIN MAY BE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS. IFS AB 2013 En4830-1 Production: IFS Corporate Marketing, August 2013.