Monday, February 23, 2009

The case for IT Project Portfolio Management (PPM)

The fear and uncertainty about the economy cannot be overstated. Cost containment or reduction is a common theme. The CIO is told by the CFO to cancel or postpone all projects that do not enhance the bottom line in short-term. The CIO's team has the difficult task of identifying candidate project(s), assessing operational impacts, and creating a mitigation plan that deals with any adverse outcome. In essence, the team has to apply IT Project Portfolio Management (PPM).

PPM aims to maximize IT business value through effective management of IT investments and resources. There are two key elements as follows:

  • Discipline
    • Project Portfolio Management – involves analysis of new project submissions, opportunities assessment, business case/value development, project pipeline prioritization & sequencing, financial management, resource management, etc
    • Project Performance Management – involves managing project risks, costs, milestones, dependencies on other projects, monitoring & reporting, post-implementation analysis (metrics, surveys…), etc
  • Tooling
    • Repository – maintains information about projects, resources, policies, cost models, and other related data
    • Dashboard – provides visibility into project portfolios and reporting such as issues, impact analysis, dependencies, metrics (# of projects, % of delays, avg costs, resource allocations & utilization, …), etc
    • Workflow – automates governance processes (i.e. approval, rejection, notification)
    • Integration – provides integration with other systems (i.e. time tracking systems, change management)

Especially in a recessionary economy, PPM is beneficial to help organizations gain a better visibility & control of IT, and make more informed decisions. It enables organizations realize IT business value & alignment in concrete terms rather than theoretically.

As PPM is an IT management capability, there are varying levels of process maturity & capability. Today's most mature organizations typically have established processes and organizational models (i.e. PMO), but most don't capture any business, financial, and operational metrics with any degree of consistency & reliability. So, it is not easy (if impossible) to evaluate portfolios against business value & performance. In less mature organizations, there is no formal governance processes around PPM. Emails & spreadsheets are typically used for communication, tracking, assessments, and reporting. And, tribal knowledge weighs more than it probably should on critical decisions.

Here are some questions to consider:

  • What is the success/failure rate of the IT projects & investments (schedule, budget, quality standards…)? What percentage meets successful delivery criteria? What percentage is abandoned or never deployed (% of shelfware)?
  • Is there a consolidated view of the current & future projects? Is the pipeline prioritized and sequenced properly? Is it possible to analyze dependencies effectively?
  • What is the avg cost per portfolio? Is the cost/business value ratio balanced? How do different portfolios compare?
  • Which portfolios are critical to core business? Is there a different sourcing model for non-core portfolios? What would be the technical, financial, and operational impacts of re-sourcing them? What parameters should I set as criteria to evaluate external service providers (i.e. SaaS)?
  • How does the information from the above feed into the annual business strategy & IT planning processes?

The current best practice on IT management (i.e. Run IT as a business) puts a lot of emphasis on PPM. When PPM is integrated with other related disciplines such as Application Portfolio Management, IT Asset Management, etc, it can provide tremendous benefits and facilitate business alignment & effective IT management.

Given the current state of the economy and growing pressure on IT to deliver more, I believe PPM is essential and timely to help CIOs manage budgets better and realize opportunities for change & innovation.

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