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Midsized firms settle for project management functions of PPM software

Despite the potential of project and portfolio management (PPM) software, most midsized firms use it to manage projects and resources, not a project portfolio.

As IT organizations adjust their priorities and weigh which projects to pursue with their limited funds during this recession, some are turning to project and portfolio management (PPM) software to help with that decision making, a recent survey shows. Relatively few, however, are zeroing in on the portfolio management function.

PMOs must readjust
priorities in recession
As projects are delayed or canceled amidst the recession, IT staff working in project management offices (PMOs) must readjust priorities and focus on a new form of value generation.

"A fundamental aspect of what a PMO should be focused on is altering the conversation between the business and IT to one of value, and [translating] the business outcomes that are important," said Mike Rollings, a senior analyst at Burton Group. "If you are literally just managing the activities within IT and doing more project management, but not altering the conversation around value generation, that's when the value of a PMO starts to be questioned."

PMO teams that are laid off or reassigned "tend not to be doing the job very well," either by not being responsive to needs in the trenches or becoming too bureaucratic, said Chris Howard, vice president and director of the executive advisory program at Burton Group.

Some 22% of the 236 survey respondents have a PMO. -- R.L.

Indeed, just 31% of respondents who use PPM software report that they derive strong value from it. Most focus instead on discrete project management, which was the top feature cited as desirable and valuable by respondents (70% and 80%, respectively). But analysts believe the recession will drive up interest in portfolio management as its own discipline -- particularly in the midmarket, where arbitrary cost cutting is of special concern.

"We are going through a global economic transformation," said Mike Rollings, a senior analyst at Midvale, Utah-based Burton Group Inc. "As a result, portfolio management [can offer] increased transparency as to what's actually happening, [encouraging] greater attention to ROI and metrics guiding future use of resources."

By organizing project categories and resources into various portfolios, each carrying its own timeline and level of priority, midmarket organizations can focus not only on the projects that will deliver the most immediate value, but also on those areas of the business that will carry it forward once the recession subsides.

"If you cut the wrong thing and then come out of the recession, where are you going to be?" Rollings said. "The people who can plan effectively the things to dial back or kill altogether will come out of this and be at an advantage."

Just 28% of the 236 survey respondents report having more than one project queue, whether they use PPM software or not. Yet the criteria for project approval has changed in the past 12 months, with respondents reporting an increased focus on fast ROI and revenue and profit outweighing such criteria as meeting a critical or strategic business need. Concerns also include enabling the organization to meet regulatory or legal requirements and having the expertise and resources available (see chart).

As many organizations reconsider IT priorities, putting discretionary projects on hold or canceling them altogether, "the silver lining is that it's created some time for IT shops to figure out where their priorities are and make value assessments, as they're under a lot of pressure to reduce costs," said Chris Howard, vice president and director of the executive advisory program at Burton Group.

More PPM resources for CIOs
CIOs with, without PPM software discuss IT project governance

Project portfolio management software helps CIOs cope with budget cuts

Sanjeev Pal, who oversees the project and portfolio management practice at Framingham, Mass.-based advisory firm IDC, said his company tracked 8.1% growth in the PPM software market in 2008. Although the firm expects that figure to drop to 3.8% growth in 2009, "that's a really good sign," Pal said, given across-the-board software-spending cuts imposed in many midmarket organizations.

In the survey, 7% of those organizations without PPM software plan to buy it, about half of them this year. Overall, 17% of respondents have PPM software in place, and of those, 26% implemented it during the past year.

Midmarket companies warming to PPM

Landson Li, supervisor of business systems at Fleet Canada Inc., a 120-person firm headquartered in Fort Erie, Ontario, that provides manufacturing support for the aerospace industry, uses Microsoft Project for project management. He said

If you cut the wrong thing and then come out of the recession, where are you going to be?
Mike Rollings
senior analystBurton Group Inc.
he's considering a move to more robust PPM software to help with an ERP upgrade, which was delayed last year but is expected to begin in the second half of 2009. Li said he'd look to use it for managing people and resources, adding that it's too early to say whether he would use PPM software to manage project-related finances.

"I don't think senior management has any formal PPM training, so everything is in my hands right now," Li said. "I'm going to have to drill down and look at why one would be better than another."

Jon Clayton, director of IT at Ben Hill Griffin Inc., a 450-person agricultural company based in Frostproof, Fla., heads up a two-person IT shop that maintains a half-dozen primary, purchased applications.

The company also uses Microsoft Project to organize meetings, and capture stakeholders and the like, but unless the company grows significantly in the near future, Clayton said he doesn't expect to purchase specific PPM software.

"We have not recently done any large software or hardware projects where we had much need for that," Clayton said.

Financial criteria take center stage
A majority of survey respondents who reported changes in project approval criteria say that financial criteria are more important than in the past. How have the following criteria for IT project approval changed in the past 12 months?
More important
Less important
 Its impact on revenue.
 The financial case for it in general
 (ROI, internal rate of return, etc.).
 Its impact on profit.
 It meets a critical or strategic business need.
 It can be completed in less than six months.
 It will enable the organization to meet
 regulatory or legal requirements.
 We have the expertise to do it and the
 resources available.
 It is a required upgrade to a system.
 The business owner has a lot of clout.

Balance of respondents answered "no change."
Source: survey, May 2009.

Let us know what you think about the story; email: Rachel Lebeaux, Associate Editor

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