Why You Need a Project Management Office (PMO)

Companies seeking more efficiency and tighter monitoring of IT projects are opening project management offices (PMO) in growing numbers.

By Megan Santosus
Tue, July 01, 2003

CIO — For years, IT departments have struggled to deliver projects on time and within budget. But with today’s emphasis on getting more bang for the buck, IT has to rein in projects more closely than ever. That challenge has led many to turn to project management offices (PMOs) as a way to boost IT efficiency, cut costs, and improve on project delivery in terms of time and budget.

While not a new solution, the trend toward implementing PMOs to instill much-needed project management discipline in IT departments is spreading fast. "More people lately have been talking to me about PMOs than they have in the last 10 years," says Don Christian, a partner at PricewaterhouseCoopers. PMOs can help CIOs by providing the structure needed to both standardize project management practices and facilitate IT project portfolio management, as well as determine methodologies for repeatable processes. The Sarbanes-Oxley Act—which requires companies to disclose investments, such as large projects, that may affect a company’s operating performance—is also a driver, since it forces companies to keep closer watch on project expenses and progress. W.W. Grainger, an industrial products distributor, has a PMO that "enables us to complete more projects on time and on budget with fewer resources," says Tim Ferrarell, senior vice president of enterprise systems.

But PMOs are no panacea for project challenges, including battling today’s tepid business climate. For one thing, there is no uniform recipe for success—it’s important that the PMO structure closely hews to a company’s corporate culture. PMOs also won’t give organizations a quick fix or deliver immediate, quantifiable savings. And companies with PMOs report that they don’t necessarily yield easy to use cost-saving benchmarks and performance metrics. In a survey conducted by CIO and the Project Management Institute (PMI), 74 percent of respondents said that lower cost was not a benefit of their PMOs.

However, survey respondents still reported positive benefits from the formation of a PMO, even if quantifiable ROI is elusive. Out of 450 people surveyed, 303, or 67 percent, said their companies have a PMO. Of those with a PMO, half said the PMO has improved project success rates, while 22 percent didn’t know or don’t track that metric, and 16 percent said success rates stayed the same. There is also a strong link between the length of time a PMO has been operating and project success rates: The longer the better. While 37 percent of those who have had a PMO for less than one year reported increased success rates, those with a PMO operating for more than four years reported a 65 percent success rate increase. The top two reasons for establishing a PMO, according to the survey: improving project success rates and implementing standard practices. In a finding that indicates PMOs’ importance, a survey-leading 39 percent of respondents said the PMO is a strategic entity employed at the corporate level, meaning it sets project standards across the enterprise and is supported by upper managers.

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