by Rick Cook

Closing the Governance Gap With Project Portfolio Management (PPM)

Jun 16, 20087 mins
IT LeadershipProject Management Tools

Having problems allocating project resources? PPM measures available resources, such as time and money, against all the proposed projects and applies a consistent methodology to align them with the goals of the business.

Trying to run an IT project without knowing your resources is like trying to buy a car without knowing how much money you’ve got. Unfortunately a lot of companies still try to do just that, but project portfolio management (PPM) can help.

Jerry Hodge, senior director of information services at appliance maker Hamilton Beach Brands, located in Glen Allen, Va., thought his small IT department had about 20 projects. It turned out the company had 60 of them. Shawn Johnson, assistant director of project portfolios at Principal Financial Group, a Fortune 500 financial services company, recounts the story of three project managers showing up at a planning meeting with project plans that all called for 100 percent of the same resource in the same time period. And of course the most common result is projects that are doomed from the beginning because no one realizes there aren’t enough resources available.

Enter PPM. In effect, it is meta-project management; it’s about managing the process of project management and aligning it with business goals. The aim of PPM is to measure available resources, such as time and money, against all the proposed projects and apply a consistent methodology to align them with the goals of the business.

“Project Portfolio Management lets you look at all the competing investment opportunities and determine which will have the greatest impact on strategic objectives,” says Lewis Cardin, a senior analyst who follows PPM for Forrester Research in Cambridge, Mass. “As far as business executives are concerned you’re getting them where they live because they’re being measured on those objectives.”

This isn’t easy and it isn’t pain-free, but it is increasingly important. Cardin points out that almost 20 percent of current IT budgets are going into project development. Meanwhile, only about 30 percent of companies have implemented project portfolio management, although 70 percent or so say they have project management offices to oversee projects.

“The adoption rate by business is pretty phenomenal,” Cardin says. “We look at the key players and they’re doing 25 or 30 or 80 percent growth in customer numbers and licenses sold.”

Currently, there are more than a dozen major vendors of project portfolio management. In recent years IT players like IBM, HP and Oracle have made acquisitions to add PPM to their own offerings. Meanwhile, project management companies such as Primavera and Planview have strengthened their PPM offerings. In addition to companies selling software, vendors such as Innotas are offering PPM on the software-as-a-service (SaaS) model.

Three Legs of PPM

Although PPM involves sophisticated software, it is not about software. The software is only part of it and the other parts are, if anything, more important.

“There are three legs to the triangle: people, process and tools,” says Hodge, who uses Innotas On-Demand PPM, an SaaS product for his 30-person IT group.

The place to start is business processes. “Without a defined process, you’re going to struggle,” predicts Principal Financial Group’s Johnson, whose company uses Primavera’s PPM tools to manage about 1,000 project management users and another 5,700 workers who use Primavera time sheets as part of their project responsibilities.

Cardin puts it more strongly. He says that Forrester has found that one of the most common reasons for failure in PPM is in trying to establish PPM before the business processes are in place.

“You have to understand business process and the business problem,” agrees Tony Velleca, the CIO of UST Global, a Viejo, Calif., IT and business processing services company. UST Global uses Innotas for about 5,000 users working on more than 600 projects. Velleca notes that this process focus has to follow through to training as well. “Our first set of training was probably too technically oriented. Changing the context of the way PPM was presented helped us quite a bit.”

The process work starts before the PPM tool is selected. “I was doing it part time, so I probably spent the better part of six months getting the processes in place and getting my team executing as best they could,” Hodge says. “I wanted to start with people before I brought in the tool. I wanted to make sure I had my processes in place. I had to get training for my people relative to project management.”

“Then it was time to start evaluating tools,” Hodge concludes.

People are important to the entire PPM process. PPM runs on information, and employees have to supply information, often at a considerably greater level of detail than they are used to. PPM typically takes more effort than the old way of doing things and that can produce resistance. “You’re introducing some rigor and process and if the people affected don’t understand what’s in it for them then there’s resistance,” Cardin says.

“You’re not only managing projects but you’re doing huge cultural change,” Hodge says. As a result, it’s important that PPM get buy-in at all levels to make the process work. That means both strong support from the top and a concerted effort to educate the workers on the value of PPM.

Another important consideration is the PPM managers themselves. “Project management offices succeed or fail around the kind of leadership that’s put in there,” Cardin says. “You want project management officers who are very collaborative in their management style. You don’t often legislate this stuff with success. You get a little autocratic and then it comes to be looked at as burdensome overhead rather than enabling the process.”

Getting Control

Governance aside, one of the most important functions of PPM is that it gives better control of projects—and more warning when a project starts to go awry.

Generally when adopters of PPM talk about benefits, they don’t include cost savings. Velleca says that UST Global did realize some cost savings from making it easier to collect and organize data on projects, but that wasn’t the big thing.

“If one major project goes south, it can cost the company at least a million dollars,” Velleca says. Since most of Global’s projects are done for outside customers, it’s a direct hit on the bottom line.

“Our focus is around our long-term relationship with our customers,” Velleca says. “We’d rather take the hit and give customer satisfaction, so we’ll suck it up and take the loss.”

Although Global is unusual in that it’s an IT services company, the principle is broadly applicable. PPM’s cost savings come not in trimming budgets but by making it more certain that projects stay within those budgets and giving early warnings when problems arise.

Most PPM software is strong in analytical tools, which makes it easy to track projects more precisely and to keep management and customers informed of the state of the projects. “One big part of the tool that has helped us is an issues tab (on the dashboard) that can capture issues and change requirements,” Hodge says. This not only increases visibility of issues, but it makes it easier to evaluate their impact and inform stakeholders. “Before, we’d change the project and we never went back and did an impact analysis on changed requirements,” Hodge says. “The user was under the assumption that the original schedule stood.”

The Expanding Role of PPM

Although project management is usually thought of as an IT function, the basic discipline is applicable to a lot of other parts of the business as well. As a result, PPM is increasingly moving beyond IT and into the more general business as executives in all areas try to get better control.

“The project management offices were the initial adopters,” Johnson says. “Second was IT. The trend we’re seeing now is ‘this is the year of the business.’ Now it’s the business resources saying I’m running operations but I need assistance. They’re feeling resource pain or priority calls. Now there are more business people using new (PPM) licenses than IT people.”

“This whole portfolio management thing is kind of like glue from an IT perspective,” says Cardin. “It takes strategic plans, business cases, governance and portfolio management and they all play with or against each other in the project management process. That’s why it’s becoming such a strategic function within IT organizations now.

Rick Cook has been writing about computers since “mass storage” meant an 80K disk drive. He has been involved in project management for only a little less time and has an interesting collection of scars to show for it.