Midmarket companies adopt project and portfolio management software for help with various aspects of IT project prioritization and execution, yet a PPM solution isn't a panacea for challenges in some important areas, including resource allocation and ROI calculations, they say.
In a recent comprehensive survey on IT project governance and PPM, SearchCIO-Midmarket.com found that PPM hasn't yet reached many midsized firms: 50% of midmarket companies don't have a PPM discipline in place and almost 80% don't use formal PPM software. The survey was conducted in May and had 236 respondents from companies with 100 to 1,000 employees.
But for the companies that are using some sort of PPM solution, some are still struggling with resource allocation issues (23%) and measuring the value of projects after the fact (38%). Resource management was one of the top drivers of the PPM software purchase, one of two features cited as very important to the purchase by some 60% of respondents (the other was project management).
Of course, survey respondents noted that software can make projects more efficient, but they can't add bodies if the problem is strapped resources. And it can only calculate ROI if project benefits have hard dollars associated with them.
Resource allocation issues remain
Until recently, IT project prioritization was not a formal process at The SSI Group Inc. "People were working on whatever they wanted [to manage projects] -- mostly in Microsoft Excel," said Vernon Coleman, senior project manager at the Mobile, Ala.-based organization, which offers claims management technology for the healthcare industry. "The COO was just farming out projects to different groups, or anyone who was free. It was taking too long and no one was tracking hours or costs per project."
When Coleman joined the team, it was in desperate need of formal project processes to help control project budgets and better forecast deadlines and timelines. Coleman and his team made the decision to invest in Microsoft Office Project software to help the IT organization effectively track hours, costs and resources for projects.
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Cost estimates
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| For midsized firms without the budget for a full-fledged PPM software system, Microsoft Project and Software as a Service (SaaS) options are more affordable approaches pursued by a majority of survey respondents. "An investment in PPM software can cost anywhere from $500,000 to $1 million," said Craig Symons, a vice president at Forrester Research Inc. in Cambridge, Mass. "And it can take six months to a year to get up and going and see the benefits." Some 31% of the midmarket survey respondents with PPM software use Microsoft Project, and another 18% use another product via SaaS. This roughly corresponds with the 52% that spent less than $50,000, although other survey respondents reporting this level of spending said they use software from Daptiv Inc. and Innotas. Another 16% of survey respondents spent $50,000 to $100,000, including CA Inc. users, and 32% spent $100,000 to $500,000, including users of Oracle Corp., SAP AG and Serena Software Inc. |
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In Coleman's view, the biggest benefit of the tool has been the resource allocation function, which helps to assign the right tasks to the right people. "Because of the software, we can now identify specific skill sets and people's ability to meet deadlines much better," he said.
Although the software is helping, Coleman said resource allocation is still a challenge. "People are still tight," he said. "But the process is much better with PPM."
Using a similar team approach to PPM and an investment in VersionOne Inc.'s Agile Team project management software, another midmarket company has seen an improvement in resource allocation with its PPM solution but still faces some governance challenges.
XanGo, a global nutrition company with 650 employees, has a number of cross-functional IT teams. Each team is assigned to a business unit, and together they work on prioritizing projects.
"The team approach really works for us," said Russell Fletcher, who until recently was vice president of IT at the Lehi, Utah-based company. "We hardly think about resources."
However, Fletcher did run into resource issues for projects that affected multiple business units. When assigning resources for cross-company projects, the company's technology steering committee usually takes over and handles the decisions. "The team is tasked to pick which projects to do and who is working on them," Fletcher said. "They base their decision on money, expediency and company value," not formal PPM practices.
This often leads to resource constraints when dedicated members of certain teams have to be pulled off projects to work on cross-company initiatives, as assigned by the technology steering committee.
PPM vendors have heard users' concerns about the challenges of resource allocation and are working to respond, according to one analyst.
"This is an area that the vendors know is an issue," said Craig Symons, a vice president at Forrester Research Inc. in Cambridge, Mass. Most PPM vendors are working on addressing this issue by putting resource modules in their software or enabling modeling for projects, he said.
PPM as a tool for ROI calculations
A third of survey respondents said their PPM tools have been helpful in determining project ROI, although others say that among their project and portfolio management lessons learned is the fact that ROI isn't always the right metric.
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People are still tight. But the process is much better with PPM.
Vernon Coleman
senior project manager, The SSI Group Inc.
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The SSI Group has found that its PPM software "absolutely" helps demonstrate project ROI, Coleman said. "I think because the process is now better, we can better forecast return than we did before," he said.
But executives at XanGo don't put as much emphasis on ROI. Instead, Fletcher's team tried to track the proposed business value of IT projects.
PPM helped "determine what's important and what's not, but not necessarily in terms of ROI," Fletcher said. If the business team wanted to measure projects by their ROI value it could, but Fletcher's team gave more subjective ratings to the potential return on projects prior to launch. It used a scale of 1-10, with 10 being the ranking for projects with the greatest perceived business value.
Whether companies are using ROI or a scale of 1-10 to measure the value of projects, financial analysis still plays a critical part in PPM. "You can't do PPM without financial analysis," Symons said.
Let us know what you think about the story; email: Karen Guglielmo, Executive Editor
