The Advantages of Project Management in Software Development

Project Management in Software Development Taking the Complexity Out of June 2012 Nick Castellina, Nuris Ismail

Project Management in Software Development: Taking the Complexity Out of In a survey conducted between January and March 2012 of 349 organizations that conduct IT-based projects, Aberdeen found that, when it comes to IT projects such as software development, it can be difficult to effectively manage the people and technology to deliver on-time and onbudget. Unforeseen setbacks and lack of resources can result in rising costs and late delivery of new software to internal customers. Specialized skills become valuable resources that must be managed accordingly. Additionally, increasingly volatile markets add a high level of risk to project plans. Top performing organizations are implementing a set of capabilities designed to keep costs in check and prevent scope creep. This Analyst Insight will illustrate Best-in-Class strategies for delivering software that provides the organization with a high Return on Investment (ROI) while managing the triangle of quality, cost, and time. Business Context Aberdeen s March 2012 report, Project Management: Putting the Pieces Together uncovered the pressures faced by project-based organizations along with the ways in which those organizations overcame their challenges. For those organizations it was clear that managing resources and costs can be difficult in a volatile market. Aberdeen s research revealed that the pressures facing organizations with projects that develop software are not dissimilar to those facing all project-based businesses (Figure 1). The lack of available skilled resources is always a top concern. In the case of software projects, it is especially challenging because it requires finding the right talent with specialized skills in coding and the ability to approach the coding of the software with innovation and creativity. Finding this talent, keeping it, and deploying it correctly is of utmost importance. June 2012 Analyst Insight Aberdeen s Insights provide the analyst's perspective on the research as drawn from an aggregated view of research surveys, interviews, and data analysis Figure 1: Top Business Drivers Lack of available skilled resources needed for projects Global / distributed (virtual / remote) teams create the need for collaboration 38% 36% Increasing risk exposure across project portfolios 30% 0% 20% 40% This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

Increasingly distributed teams putting a strain on collaboration is the second leading pressure, but the other top pressure illustrates how volatile markets effect project management. Thirty percent (30%) reported an increasing amount of risk affecting their project portfolios. Today s business environment is in a constant state of flux meaning that long-term projects are susceptible to multiple changes before the project is completed. Risk can come in many forms. In software development, skilled employees could leave the organization, IT infrastructure could become outdated, or many other factors can contribute to the success of a software development project. For example, this can include poor estimation of the length of the project. Organizations must be prepared to factor these risks into their project plans. These external market pressures challenge software project-based organizations in their quest for profits, but there is also a set of internal, project-based pressures that impact a project manager s ability to succeed (Figure 2). The top pressure reported is customers frequently changing their minds mid-project. When this happens for software developers, it means having to change the code, which isn t easy to do when you have code that is thousands of lines long. Thus, it becomes more difficult to reign in costs and maintain project scope. This is compounded by the fact that 19% of respondents cited that senior management frequently changes priorities mid-project. Project managers must walk these tightropes while attempting to complete projects on-time and on-budget. Figure 2: Top Project Specific Pressures Customers frequently change their mind mid-project Contention for specific limited resources Need to use project resources more effectively Too many late projects Senior management frequently change priorities mid-project 19% 27% 39% 38% 36% 0% 10% 20% 30% 40% In alignment with the top business driver, 38% of respondents are pressured by contention for specific limited resources. Certain employees may have the skills needed to help the organization past certain stages of projects, but those employees are tied up elsewhere. This is where project scheduling becomes particularly important. This is evidenced by the fact that 36% of respondents indicated the need to use project resources more effectively. When it comes to software development, there are multiple people involved in the design and testing of the software, and often it is the case "Project Management applications are critical in today s IT project space. Client collaboration is as important as project team collaboration." ~Manager, Large Computer Equipment Manufacturer Fast Facts Why do projects perform poorly? 54% poorly defined project requirements 35% changes added after the start of the project 20% projects not adequately staffed 19% time spent waiting for communication

where they are involved in multiple projects at the same time, so getting people s time is truly a challenge. Lastly, 27% of respondents reported that they have too many late projects. Bringing in projects late causes the organization to incur increased costs. This becomes a major factor in guiding the project to produce a high ROI. The Maturity Class Framework Aberdeen used three key performance criteria to distinguish the Best-in- Class from Industry Average and Laggard organizations. These KPIs were selected because of their influence on an organization's ability to deliver projects on-time and under budget. Table 1: Top Performers Earn Best-in-Class Status Definition of Maturity Class Best-in-Class: Top 20% of aggregate performance scorers Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers Mean Class Performance 92% of projects delivered early or on-time 97% of projects delivered within budget If projects are late, on average how late: 3.1 weeks 74% of projects delivered early or on-time 85% of projects delivered within budget If projects are late, on average how late: 6.9 weeks 38% of projects delivered early or on-time 56% of projects delivered within budget If projects are late, on average how late: 17.8 weeks Strategic Actions In order to combat these pressures, Best-in-Class companies are putting in place a set of strategies designed to facilitate project management (Figure 3). Of course, what truly separates the Best-in-Class from all others (the Industry Average and Laggards combined) is their ability to actually execute these strategies. Where the Best-in-Class truly outpace all others is in risk management. Forty percent (40%) of the Best-in-Class are building assessment of risks into various stages of the project compared to 27% for all others. This is to directly counter the pressures of volatile markets filled with risk. In all likelihood, events are going to happen that are out of one s control during the course of a project. By building the probability of these events, and their effect on the project, into project plans, decision-makers can build contingency plans, react on the fly, and maintain project scope.

Figure 3: Strategic Actions of the Best-in-Class Define and implement standard project management best practices Build assessment of risks into various stages of the project (stage-gate) Invest in technology to assist in the management of projects 27% 30% 31% 40% 48% Best-in-Class All Others Key Business and Technology Capabilities The success of an overall business or even individual project requires people, tools and technology to work together. A highly effective project management execution requires a combination of strategic business capabilities and technologies to effectively achieve Best-in-Class performance. 64% 0% 35% 70% Organizationally, there is a specific capability that is necessary for software developers. Best-in-Class organizations are over twice as likely as all others to have implemented an Agile software development process (Figure 4). An Agile software development process involves planning the process in short stages, moving from requirements analysis to testing. This involves crossfunctional teams and leads to more fine-tuned products. Software developers using an Agile process are more focused on the individual parts of the project, can more quickly identify potential problems, and can enforce quality standards. This also helps to enable the organization s ability to mitigate risk. "The main activity of planning needs to be more iterative and constantly upgraded until we reach the final stages based on the learning we have during tracking. This enables us to utilize other techniques /inputs to device work-arounds for the obstacles/challenges we face. This will always help the manager to be on top of all the parameters of the project and help in successful execution." ~Director, Midsize Software Company Figure 4: Agile Software Development 50% 25% 0% Best-in-Class Industry Average Laggards 47% 29% 15% Agile software development process

All projects that businesses face can involve volatile environments filled with risk. As software development projects can be long, drawn out, and expensive, the impact of these events happening can have a huge effect on the bottom line. There are many types of risk that can affect the project, from viability of the software itself to changes in requirements to the ability of employees to deliver on-time. For example, losing software code could have a catastrophic effect on the ability to finish the project to plan since it would require rework. Therefore organizations need to include this risk in the project plan. This can make budgets more accurate and allow the organization to build contingency plans into the overall project plan. Fortynine percent (49%) of the Best-in-Class have the ability to embed risk into project plans compared to 42% of all others (Figure 5). By identifying and monitoring key risk indicators and assessing their impact, project managers can build more realistic plans. Figure 5: Embedding Risk into Project Plans 60% 30% 0% 49% Best-in-Class 42% Ability to embed risk information into project plans All Others 43% 20% Ability to perform 'what-if' scenarios An extension of this ability to imbed risk is the ability to perform what-if scenarios. The Best-in-Class are over twice as likely as all others to have this capability. This allows project managers to see the impact of certain events ahead of time and fosters more accurate budgets, the ability to build in contingency plans, and more agile decision making. Evidence of this enhanced ability to build in contingency plans is the fact that Best-in-Class organizations are 77% more likely than all others to have pre-defined corrective actions for possible exceptions (Figure 6).

Figure 6: Planning Ahead and Looking Back 90% 60% 30% 0% 46% 26% Pre-defined corrective actions for possible exceptions Best-in-Class 59% All Others 48% Required skills are mapped to project resources 79% 65% Post completion meeting is conducted to determine success of project and lessons learned To further facilitate project management, 59% of the Best-in-Class map required skills to project resources. Early identification of these constraints at the portfolio decision stage is essential. Organizations that commit to projects without understanding if the right skillsets are available face delays when these constraints are subsequently discovered. This is especially important for projects where skills are highly specialized. Beyond the pool of employees involved in the project, there must be enough of each type. In software development coders, developers, quality assurance engineers must be allocated to projects based on their skillset. The Best-in-Class recognize the importance of mapping required skills to project resources upfront and are able to identify if they need to hire new staff, outsource aspects of the software development process, or readjust priorities. Early visibility into these factors permits the Best-in-Class to accurately assess the costs and time required to complete a project. Lastly, top performers benefit from learning from their mistakes and successes. Seventy-nine percent (79%) of the Best-in-Class conduct post completion meetings to determine the success of their projects along with the lessons learned. Hindsight is 20/20, and sometimes when organizations take the time to learn from a lesson learned it helps facilitates success in future projects. For project managers to make educated decisions, they must have full visibility into the status of all procedures. In order to allocate resources effectively and introduce efficiency into the course of the project, Best-in- Class organizations are 47% more likely than all others to have central visibility into resource workload across projects (Figure 7). Thus, these organizations can reallocate employees and other physical resources to areas where they are most needed.

Figure 7: Real-time Visibility 80% 40% 0% 53% 36% Central visibility to resource workload across projects Best-in-Class 71% All Others Decision makers are notified in real time as exceptions occur 63% 43% 42% Real time visibility into all project milestone and schedule status Fast Facts The Best-in-Class are 60% more likely than all others to have real-time visibility to project data and information for organizational stakeholders The Best-in-Class are over twice as likely as all others to have real-time visibility to project data and information for partners / customers / suppliers As the project goes on, there is always the likelihood of changes happening and adjustments needing to be made. It becomes the project manager s job to ensure that schedules are adhered to. The Best-in-Class are 50% more likely to have real-time visibility into all project milestones and schedule status. Sometimes, increases in project scope or timelines are unavoidable. For this reason, Best-in-Class organizations are 65% more likely to provide decision makers with real-time alerts to exceptions as they occur. This allows them to adjust schedules accordingly, and quickly react to change, whether it be a set back to the project or new opportunity. Next, monitoring performance is essential to the success of any project. As mentioned above, measuring past performance allows project managers to learn from their mistakes and apply knowledge going forward. Sixty-six percent (66%) of the Best-in-Class continuously monitor the value of inprocess projects to approve and continue those projects. This is done with the aim of maximizing ROI. If software is being developed that is not going to aid the employees that it is intended for, there is really no point in continuing the project. Project managers must manage these interactions and know when to kill a project.

Figure 8: Monitoring Performance 90% 45% 0% Best-in-Class 66% 43% Continuously monitor value of in-process projects to approve / continue projects All Others 85% 61% Customer satisfaction is monitored and measured Lastly, 85% of the Best-in-Class monitor and measure customer satisfaction. This is important in software development because oftentimes internal customers are providing input into the project as time goes on. Monitoring satisfaction allows the Best-in-Class to make things right if the customer is unhappy. When successful projects aid in the ability for the organization to run effectively, it promotes the value of the IT department to the organization. Technology Enablers In addition to the capabilities above, Best-in-Class organizations are implementing a set of technology enablers to facilitate software project management (Table 2). In fact, the Best-in-Class are 52% more likely than all others to have a standardized implementation of project management software across the enterprise. These varying types of software assist with different parts of the process. Prior to embarking on the project, the Bestin-Class are taking advantage of tools such as project costing, project scheduling, and idea management. During the project they are using project management and reporting, document management, collaboration tools, and workflow automation tools. Finally, after completion, the Best-in-Class are using tools such as application portfolio management and post project completion service management. By combining these technologies, the Bestin-Class are better able to plan projects, utilize resources, and automate workflow, with the ultimate goal of projects that produce high ROI.

Table 2: Technology Enablers Technology Enabler Best-in-Class All Others Project Scheduling 89% 75% Project Management and Reporting 84% 68% Project Costing 76% 54% Document Management 76% 63% Collaboration tools 76% 54% Workflow automation tools 58% 35% Application Portfolio Management 52% 31% Post project completion service management 50% 30% Idea Management 41% 24% Key Takeaways The key to success in software development is managing the speed, cost, and quality triangle to produce high ROI. While that sounds simple enough, with so many inter-connected moving parts, this is very difficult to do without the necessary organization and tools to schedule resources, manage and report against project delivery and control costs. As shown throughout this analysis, Best-in-Class companies are using a combination of business capabilities and technology to successfully deliver software development projects to meet expectations. For companies looking to improve their project management initiatives, Aberdeen suggests the following: Plan ahead. Best-in-Class organizations are over twice as likely as all others to have the ability to perform what-if scenarios. This allows them to build more accurate plans and also allows them to create contingency plans. Therefore, when adverse events do occur, the project manager is prepared and can react immediately. Embed risk into project plans. In a volatile environment, increasing amounts of risk impact project plans. By identifying risk along with its impact, project managers can anticipate changes that need to be made to budgets and plans. This increased accuracy enables the organization to make better investments. Forty-nine percent (49%) of the Best-in-Class embed risk into project plans. Provide visibility into resource scheduling and map skills to projects. First, organizations must be able to identify the talent and assets that they have and where those resources are currently allocated. Then, project managers must allocate the skills needed to the project teams that can most benefit from them. Sometimes that means hiring new employees or outsourcing parts of the software development to a third-party. This is essential in projects where certain aspects of the project may require specified skill sets. By gaining this visibility, organizations can better readjust priorities and set proper expectations to meet demand. Top performers are more

likely to have visibility into resource scheduling which enables the ability to map employee skills to the project. Introduce an Agile software development process. An Agile development process enables organizations to react quickly to changes that need to be made and keep the project from heading down the wrong path. Forty-seven percent (47%) of the Best-in- Class have this capability compared to 23% of all others. Adhere to project milestones and schedules. The main responsibility of the project manager is to contain costs and maintain project scope. Scope creep can have a major effect on the bottom line. Best-in-Class organizations are 50% more likely than all others to have real-time visibility into project timelines. Provide real-time visibility to decision-makers by utilizing alerts. The ability to react on the fly is essential in volatile environments. Agile decision-making helps the organization to mitigate adverse events and take advantage of opportunities. Top performers are aiding decision-makers with automatic alerts based on both internal and external events. This spurs quick thinking. Measure success. Measuring performance gives organizations the ability to optimize performance and learn from their mistakes. Not only are post-project completion meetings essential, but monitoring performance throughout the project allows project managers to react on the fly and alter plans to make them more effective. By following these tips, software developers can improve productivity, cut costs, and improve customer satisfaction in order to foster increased ROI. For more information on this or other research topics, please visit www.aberdeen.com. To take part in Aberdeen's 2012 Project Management and Portfolio Management research, click here. Related Research Project Portfolio Management: Selecting the Right Projects for Optimal Investment Opportunity; March 2011 Executing the Project Plan: When Projects are your Business; December 2010 The Impact of Project Management Technology in the AEC Industry; March 2010 Delivering Project Profitability: On Time and Under Budget; January 2010 Author: Nick Castellina, Research Analyst, Enterprise Applications (nick.castellina@aberdeen.com); Nuris Ismail, Research Analyst, Manufacturing (nuris.ismail@aberdeen.com) For more than two decades, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.5 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen s research provides insight and analysis to the Harte- Hanks community of local, regional, national and international marketing executives. Combined, we help our customers leverage the power of insight to deliver innovative multichannel marketing programs that drive businesschanging results. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 854-5200, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com. This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (2012a)