Which Projects are Worth Your Time?
Which Projects are Worth Your Time?
Facing tight budgets and tightened belts, some organizations have turned to the concept of "project-portfolio management" to treat information-technology projects as financial assets.
The idea of ranking a portfolio of technology projects by a set of financial metricsand then demanding a return from each project approvedmay seem like a recent development. But treating initiatives as financial assets dates to the late 70s, when the concept was a foundation of what IBM called Business Systems Planning.
More than two decades later, the logic finally seems to be taking hold. According to a recent Meta Group study, 50% of Global 2000 enterprises will adopt portfolio management by 2007.
Rick Len, founding director of the I.T. program management office at investment-management firm Russell Investment Group, defines portfolio management as "an organized way of considering an investment in technology, the timing of that investment, and the anticipated results of that investment against [business] priorities."
Vincent de Montmollin, I.T. project office manager for Schlumberger, says software to support project-portfolio management gives managers "a way to arbitrate between I.T. proposals within a constrained environment."
Its not an exact science and no practitioner claims its easy, but software from vendors such as Niku, Pacific Edge and others offers a system for collecting and calculating data; creating standard metrics against which to evaluate progress; and governing proposed and active projects.
Portfolio management plays second fiddle to tools that organize and implement projects, but competitively managing technology portfolios should help executives run their businesses betteror at least systematically. Successful implementations are configured to match an organizations specific needs.
Any portfolio system must be measured by how well it helps develop a companys business. A solid portfolio-management tool lets you "support whatever your strategy is," says Ernie Nielsen, Brigham Young Universitys managing director for enterprise project management. "As my organization changes, I can change the weighting, scoring anchors or strategy."
With costs, returns and risks identified and quantified, Baylor Univer- sity Chief Information Officer Reagan Ramsower says, "I can prioritize projects and in some cases eliminate them. And I can use it to show our efforts are aligned with the overall mission of the university."
The approach provides not only visibility to initiatives, but a sense of inclusion and participation. "Everybody feels engaged in the process," says Jim Albin, chief information officer at hospital operator Mercy Health Partners. Plus, he says, the system "allows us to base decisions more on facts than assumptions."
There are other variables. Defining, for instance, what constitutes the "return" on a project can be subjective. But what matters most, Nielsen says, is that "human beings get to do the assessing." The software merely implements the rules that the company sets for it.
Its critical for senior executives and managers of individual business units to be the ones who choose the metrics and decide the rules. The technology department shouldnt control the system for ranking projects.
"We wanted to get I.T. out of the decision-making process, where [it seemed like] we were the bad guys, because we really werent," says Don Haas, of the Tri-County Metropolitan Transportation District of Oregon, which uses portfolio management to track more than 100 projects and improve strategic planning.
A steering committee, and not the technology department, should be designated to select projects, and to establish and maintain the necessary discipline. The downside? "Youre creating a process and deciding who should be in itthats a bureaucracy," warns BYUs Nielsen. "You can make it as efficient as possible, but its still a bureaucracy." As Richard Shapiro, manager of Royal Caribbeans I.T. Program Management Office notes, "This is not easy stuff," but the results are worth the effort.
"If departments can still get their pet projects approved by playing a round of golf or attending a reception, whats the point?" asks Baylors Ramsower. "The decision-makers have to buy into the process as well."
But the technology team cant simply back off, not if it wants to ensure that its working on projects that actually achieve business goals. "Five years ago the traditional I.T. shop was asked only if they could get the project done on time and on budget," says Russell Investments Len. "Now were sharing responsibility with the business side to deliver on the business model.
"The benefits of portfolio man- agement arent just limited to technology," Len adds. "Our project-planning and management processes are now becoming a corporate discipline." Deadlines help avoid cost overruns; managers end initiatives that are exhibiting dangerous risk, rather than hope for a turnaround.
Of course, software isnt an absolute necessity for prioritizing projects. Discipline can come independent of a technology investment. "Weve been around 100 years and weve been very successful without these tools," says TRW Automotives Dale C. Stockman. "But now were process-oriented and focused on improving our processes accordingly." Part of that fo- cus includes looking into portfolio management.
Schlumbergers Montmollin warns its "a trap to believe that you can do portfolio management without the foundations" a good governing process and proj- ect methodology. Len agrees: "Otherwise, [deploying] a product like this is a mistake." Bringing consistency to the process, Len says, was inevitable. "Continuing to make I.T. decisions based...on incomplete or obsolete data was something we couldnt afford anymore."
Group Dynamics: Project-Portfolio Management
What it is: Software that helps companies prioritize technology initiatives by financial metrics and strategic value.
Key players: Business Engine, Kintana, Niku, Pacific Edge, ProSight.
Others: Artemis, Changepoint, Lawson, Microsoft, PlanView, Primavera
Market size: It depends. $85M in
2002, says Meta Group; $358M, says Gartner. But both estimate roughly $540M by 2005.
Whats happening: As buzzwords such as "alignment" get hotter, vendors are pushing portfolio management as a way to satisfy corporations growing desire to make technology heed the whip of profitability.
Expertise Online: www.gantthead.com Paul Harder leads discussions on what users do and dont know.
How companies* are applying project-portfolio management:
* Survey of 130 senior information technology executives; multiple responses allowed
Companies in italicized yellow type are featured in dossiers this month; Acquired by Mercury Interactive, August 2003 Sources: Survey by Society for Information Management, Kellogg School of Management and DiamondCluster