PPM strategy a CIO's must-have in hard times

CIOs should adopt a project portfolio management, or PPM, approach that begins and ends with the business -- if only to save their own skins.

BOSTON -- An analysis by Boston-based AMR Research Inc. shows that 2% to 15% of projects taken on by IT departments are not strategic to the business. Money flushed down the toilet might not be so important in, well, flush times. But in an economy that is slowing, if not in actual recession, CIOs need to allocate their resources wisely.

During the past 12 months, AMR analyst Dennis Gaughan said, more than half of the inquiries from AMR's customers were related to portfolio management -- an approach that seeks to get the highest possible return on IT investments while mitigating risk.

As the economy has soured, companies that already take a portfolio management approach to their IT investments are increasingly looking for software to automate the process, Gaughan said.

Gaughan touted the benefits of the HP Project and Portfolio Management Center at a Hewlett-Packard Co. briefing yesterday in Boston. Project and Portfolio Management (PPM) is part of HP's Business Technology Optimization Software, the fastest-growing and most profitable division at the Palo Alto, Calif.-based tech giant, with 2007 revenue of $2.3 billion, a 77% increase over the prior year.

Empty barrels make the most noise

It's not hard to see why project management software has become a priority for many CIOs. The demand for IT projects at most companies exceeds the IT department's supply of resources to make them happen. The gap has widened during the past 10 years, due to explosive growth in business applications and supporting infrastructure. The trend toward multivendor sourcing and a red-hot merger-and-acquisition market adds more complexity.

But, unlike manufacturing, with its well-established metrics for managing supply and demand, IT has been slow to develop a consistent and measurable rationale for prioritizing its work.

"When you think about how IT organizations have managed their investments historically, a lot of it is based on first-in, first out," Gaughan said. Projects tended to be collected serially from the siloed constituencies IT serves then prioritized based "on whoever screamed the loudest or had the most political clout, not because the project was expected to deliver some tangible benefits to the business," Gaughan said.

AMR noticed a change about five years ago, when CIOs began looking for ways to turn those screaming matches into a business discipline -- if only to save their own skins. The first step companies usually take is a collection and assessment of their portfolio of IT projects and how well those projects map to overall business goals, Gaughan said.

Once IT and the business have hashed out the criteria for deciding project priority, very soon after CIOs start looking for software that can help automate the process, Gaughan said. The most effective PPM software provides insight into every step of the project. It helps prioritize projects, allocate employees, monitor projects in real time, measure the ROI when the project is done and deliver all that information to their C-suite peers in language they can understand.

The three C's

CIOs who react to requests from the business on an ad hoc basis do so at their own peril, said Ken Cheney, HP Software's director of product marketing. The most frequent complaint HP hears from the business continues to be that IT cannot deliver what it needs, when it needs it.

The result is that on the critical "three Cs" -- competency, contribution and credibility -- the overworked and routinely abused IT department comes up short, Cheney said.

The HP PPM software rationalizes IT investments, from the collection of ideas and proposals through post-mortem ROI analyses of the projects. The software offers best practices, metrics for evaluating progress and real-time visibility, Cheney said.

By using the software, CIOs "can manage by exception" -- the 5% cost variance that is immediately flagged -- rather than shuffling through papers to figure out what's going on with IT investments. The collection of data then becomes the "system of record" for IT planning across lines of business, application development and operations -- ultimately allowing CIOs and the business to objectively measure the efficiency and efficacy of IT investments.

Cheney offered anecdotal evidence of benefits: to wit, a 95% reduction in audit points (from 30,500 to 500) and corresponding savings of $1.2 million per year in audit costs at Constellation Energy Group Inc., a Baltimore utility with some $18 billion in revenue.

His kicker: Knowledge is power. The more data IT accumulates on how to prioritize and manage projects efficiently, the more weight its recommendations will hold -- and the more strategic a role IT will play in the business.

In fact, PPM must begin and end with the business, said Dale Troppito, managing partner at The Gantry Group LLC, a Concord, Mass.-based consulting firm specializing in IT.

Gantry Group was hired by HP to independently assess ROI at companies using the HP PPM Center software. The six-month study showed that in all cases, the investment more than paid for itself in a year. Among the savings: an average 30% increase in the number of projects on time, a 12% reduction in budget variance, a 30% reduction in the amount of time IT spent on project reporting -- all metrics that the business can understand.

PPM technology allows IT people to shift the talk from technology to finance, Gaughan said. "IT creates a new way to communicate with the business, because you're putting it in terms of dollars and cents, and that can be really impactful for the senior IT executives."

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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