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To build better IT projects, start by building a better project manager.
Peter Krass, CFO IT
March 15, 2003
"Months late." "Way over budget." "Totally irrelevant."
If those phrases strike you as synonymous with "IT projects," join the club.
The good news is that the companies are finally getting some religion around this major, and majorly frustrating, capital expense. They be 20 years late and untold billion dollars short, but a growing number of CIOs, consultants, software vendors, and — yes — CFOs are determined to get IT projects completed on time, on budget, and in sync with corporate strategy.
Isn't that what they should have been doing all along? Yes, but the situation is more complicated than you may think. First, understand that everything your IT organization does, from installing an ERP system to repairing a printer, is thought of as a "project."
Second, it's hard to pull back and think about more-sensible approaches to projects when so many of them are going up in flames. More than half of all IT projects are "challenged" and fully 15 percent are "impaired" or failing, according to The Standish Group International Inc.'s 2002 survey of more than 13,500 IT projects.
While these figures are significantly better than they were a decade ago, the feeling of continual crisis lingers. That's not good news to any CFO watching 15 percent of the company's total IT spend go down the drain.
Perhaps an even more serious problem — and one that is nearly impossible to measure — involves IT projects misaligned with corporate strategy. Even if these projects "succeed" — that is, are finished to spec, on time, and on budget — they can be fiascoes that consume massive quantities of money, talent, and time unless they truly help the organization.
"At the end of the day, CXOs have only three agenda items: find shareholder value, restore investor confidence, and adapt for uncertainty," says Cathleen Benko, a Braxton (formerly Deloitte Consulting) global E-business practice leader and co-author of a new book, Connecting the Dots (Harvard Business School Press, 2003) on aligning projects with corporate objectives. Projects that further strategic goals help restore investor confidence.
As Benko's comments imply, much of the new focus on IT projects is being driven by the tightening of IT budgets, which has upgraded the goals of completing projects on time and on budget from "nice if you can do it" to mandatory.
The good news is, that, done right, IT project management can save a bundle. One corporation studied by Meta Group Inc. senior research analyst Melinda-Carol Ballou eliminated redundant IT projects and saves $13.2 million. Today. Most efforts to improve IT project performance fall under three broad categories: what's called project-portfolio management, new software tools, and training and professional certification.
Managing the Portfolio
The concept of project-portfolio management is simple: ensure that projects support a business's strategy; that concurrent projects don't overlap or, worse, oppose each other; and that resources (people, tools, equipment) are allocated efficiently and effectively.
IT departments manage their portfolios by listing all projects, estimating how many resources those projects will consume, and determining which projects best align with the company's overall strategy. Companies that properly align IT projects with business strategy can save 10 to 15 percent of their overall IT spend, estimated Primavera Systems Inc., a vendor of project software.
CFOs may be amazed to find this approach described as new. But J. Kent Crawford, CEO of PM Solutions, a consulting, research, and training firm in Havertown, Pennsylvania, says that in courses he teaches on effectively running IT projects, 80 percent of attendees can't even list (let alone manage) all their ongoing projects. "In IT, the term 'project manager' has been around a long time," he says, but the title is almost meaningless.
Air Products and Chemicals Inc., a manufacturer of industrial gases in Allentown, Pennsylvania, is one company that can list every one of its IT projects. In fact, the company uses what Bill Townsend, senior program managers of global IT, calls a "gating projects" whereby each prospective project is taken through a four-part decision tree on its way to final evaluation.
This process begins when the company's project managers decide whether a prospective project aligns with the company's technology plan. Then they consider the availability of the resources required. Finally, they subject the proposal to a financial ROI analysis.
In short, the company devotes as much energy to the process of project approval as it does the projects themselves, making it extremely unlikely that effort will be wasted down the line.
The More the Warier
Some companies approach the issue by establishing a PMO, or project management office. This group, typically made up of senior executives, reviews all project proposals over a certain dollar value, compares them against the business's overall strategy, and then decides yea or nay.
Siemens Enterprise Networks (SEN), a Boca Raton, Florida, division of the German conglomerate that makes communications-network equipment, has had such a team since 1998. Funding for the program has been surprisingly easy to justify, explains Kandi Miller, SEN's vice president of information management and head of the project committee. "We found that just one blown customer project and one internal initiative that didn't come in on time could basically justify the program for the first couple of years," she says. "The savings were that great."
SEN's project team does not actually manage projects, but instead helps determine whether they are worth doing at all. In the pat nine months, the team has evaluated 12 proposals and given the green light to 3. The number has been kept fairly low, since SEN is now in the middle of installing a massive SAP ERP system.
Vital support for the effort comes from Roland Meinzer, CFO of Siemens Information and Communications Network, SENS parent company. Previously Meinzer was CFO of Siemens Canada, which went through what he describes as a "traumatic" SAP implementation. Determined to avoid that in the U.S., Meinzer says that one key to success is the involvement of people not working directly on the project. "Business owners are often blind to process improvement because they live in the day-to-day- world, while the CIO is very often driven by his IT tools," he explains. "You almost need to have somebody who brings a different view."
Even more ambitiously, parent company Siemens AG is working to create a companywide project team that would not only prioritize and coordinate all major IT projects, but also set standards for software tools and procedures, as well as streamline global processes.
Siemens isn't alone. Ballou of Meta Group estimates the market for project-portfolio management services and license revenues is now a sizable $450 million and growing, with most that now going to consulting firms — in fact, Meta has been a vocal champion of the approach. "The will be, how quickly do people see results they can build on?" she says.
The point is well taken, because simply installing a project portfolio team does not guarantee success.
For one thing, the IT community seems unable to settle on a definition of what a project office does. Late last year, when Interthink Consulting, a project-management firm in Edmonton, Alberta, asked more than 180 PMO executives what drove them to create a PMO, the answers varied enormously. Thirty percent of respondents cited the need to create a consistent approach. Another 28 percent said it was to establish a single point of contact for project management. Preventing project failures was cited by 25 percent. And just over 20 percent pointed to the need to support strategic initiatives.
This lack of agreement on the PMO's basic mission seems to be creating some dissatisfaction with the results. In the same survey, fewer than half the organizations surveyed by Interthink said their PMO is a major component of project success. Worse, 12 percent said it has made no real contribution at all. "The world is still split on whether a PMO delivers value," says Interthink's president, Mark Mullaly.
Software's Hard Results
If organizational structure doesn't succeed, technology may. A growing list of software vendors offer products that aim to help IT departments manage, track, evaluate, prioritize and generally improve projects. These products range in size and scope from PC-based tools for individual users, such as the ubiquitous Microsoft Project, to web-based suites that serve an entire enterprise from less well-known vendors, including Changepoint, Fortera, ITCentrix, Niku, Prima-vera, Pacific Edge, PlanView and ProSite.
These tools have become one of the software industry's fastest-growing sectors. The market for all packaged project-management software is currently worth about $1.5 billion, estimates Dennis Byron, a market analyst at IDC, and sales are growing at roughly 10 percent a year — twice the 5 percent growth rate for the overall packaged software market.
It's a world that Byron describes as "Microsoft and everyone else." Microsoft controls an estimated 43 percent of that $1 billion, and shows no sign of ceding any ground soon.
A second category of software aims far higher: it would help entire enterprises manage their IT project portfolio. Some of these packages are designed for senior executives, while others serve a broader swath of the enterprise by providing different views for people in different job functions.
One such package is TeamPlay from Primavera, which lets IT professionals objectively measure how close a given project is to completion. Again, it's one of those problems you'd think IT folks had figured out long ago. But the truth is, estimates of completion are often meaningless to anyone other than the person making them. That's what Mort Goldman, CEO of technology assurance software vendor Fortera Inc., calls an expectation gap: "We're 80 percent done, but still have 80 percent of the work left to do."
Shine a Little Light
TeamPlay lets users define "completion," then apply that measure to all projects. That also helps managers catch troubled projects early — and, if necessary, shut them down. "History says that if a project is 20 percent off at 20 percent of its life cycle, it's never going to catch up," says Michael Shomberg, Primavera's vice president of product marketing. "So we try to help customers catch it early."
James Lester, CIO of American Family Life Assurance Co. (better known as AFLAC), in Columbus, Georgia, and a user of TeamPlay software, hasn't canceled any projects yet, but after about six months of running the software, he says visibility on the company's 60 ongoing IT projects has improved measurably." I feel like I'm not flying in a fog anymore," he says. "It's great to be able to see what's going on."
Some enterprise project software can even change the way the IT group relates to the rest of the company. That's the intention of Avery Cloud, CIO of Integris Health in Oklahoma City, a state-owned network of hospitals, clinics and other medical facilities. Using project software from Changepoint, Cloud hopes to institute a monthly charge-back for his group's IT services.
While that hasn't been adopted yet, he has managed to institute a per-PC service fee that other divisions of Integris must pay, as well as an IT infrastructure fee based on what's called an "intensity use factor": departments that operate 24/7 are charged the full fee, while groups that operate just 9-to-5 pay a fraction.
Getting business units to accept fees requires hard data, Cloud says, and that's exactly what Changepoint software is designed to provide. At one point in the discussions, Cloud says, other senior executives at his company questioned whether his IT staff was busy enough. Cloud phoned his colleagues during the meeting, got them to pull figures from the Changepoint database and was able to show that five of the IT staff had worked 60-hour weeks for the past four months. "It knocked them out of their chairs," says Cloud. "It also enhances my relationship with my CFO. No longer am I just saying, 'Trust me.' "
That said, even vendors would admit that software is neither a panacea nor a replacement for hard thinking about IT projects. "Our CEO likes to say he'd rather have an adept project manager managing a project on the back of a napkin than a poor project manager with the best software in the world," says Chuck Tatham, vice president of marketing and business development at Changepoint.
While PMOs or teams of various sorts do stress savvy management over sexy technology, another way that companies can boost the intellectual horsepower behind IT projects is by investing in the project managers themselves.
Taking a cue from the construction and civil-engineering professions, where project managers are common, some in the IT community are pushing for more training and even official certification. Not surprisingly, many of those advocating this approach — standards groups, professional associations, consultants and trainers — stand to benefit from such a change.
One such group is the Project Management Institute. With headquarters in Pennsylvania and a global membership, PMI offers training, testing, certification and a good deal more. More than 50,000 people have received the PMP certification. In January, Microsoft chose the PMP certification program as the standard for its entire services group, which has 12,000 employees.
Despite all this work to improve IT project management, some in the IT industry argue that only the symptoms are being treated, while the real, underlying causes remain untouched.
Tom DeMarco, principal of the Atlantic Systems Guild, a technology consultancy, claims that the big problem with IT projects lies not in the execution but rather in the setting of deadlines — a task often undertaken by senior executives. "The heart of the problem is a sick dynamic around expectations," he says. "There's a kind of competition to set increasingly unrealistic expectations, with no accountability. If you're the manager of a software project, there's a lot of accountability. But for setting a wrong expectation in the first place, there's none."
Another often-overlooked source of IT project trouble involves contracts. Many, perhaps most, involve third-party suppliers of hardware, software and services. Yet few IT managers know how to negotiate a contract that allows problems and disagreements to be remedied without time-killing trips to court.
"We try to get very real with both parties as regards the allocation of risk. Everyone needs to know, going in, what are the most likely things to happen — and even some of the less likely things to happen," says Wayne Bennett, a partner and leader of the technology practice at U.S. law firm Bingham McCutchen.
A good contract, Bennett says, spells out what to do if there's a dispute. "If the technical leads get into a tiff, that shouldn't make everyone get out their sabers," adds Bennett. "There ought to be somebody higher in the organization, hopefully with a cooler head. So we lay out the procedure, culminating with a sit-down by the two CEOs, who theoretically can put the dispute into perspective."
All the more reason to get your arms around project management: do you really want your CEO tied up in negotiations around a project that's months late, over budget, and totally irrelevant?
Peter Krass is a freelance writer and independent consultnat based in Brooklyn, New York, and a former editor at Inc., Planet IT, and InformationWeek.
Tackle Projects Like a Pro
To solve the problem of IT project failure, CFOs need to focus on the data. So says Ira Grossman, president of software-management firm Emergeon LLC in Troy, New York. If your company embarks on a project with a deadline 12 months out and it comes in within 14 months, is it really late? Not if you knew that 75 percent of comparable projects recently completed by other companies took an average of 15 months. So how to get this sort of data into the mix? To help you get started, Grossman offers these six steps:
1) Get the Numbers: The best way to avoid setting unrealistic expectations for future projects is to get data from completed projects. Metrics should include timing, cost, quality, and size and complexity. If you start collecting this data on current projects, over time you'll be able to do a "before and after" analysis.
2) See Software Interdependencies: We tend to forget that software development is not linear, but geometric. Double the amount of gas in your car's tank, and you can drive twice as far. Double the size of a software project, and the number of data points can easily grow four- or even sixfold. Make sure your project plans take this into account when you add features, requirements, or resources to an IT project.
3) Know Talk Isn't Cheap: Appreciate the complexity of human communications in an IT environment. Techies call this the signal-to-noise ratio. To keep the noise down, break all projects into small pieces that can be handled by teams of just three to five people, especially when shipping work offshore. If you have programmers in India being managed from New Jersey, build in time and resources for these two groups to communicate effectively.
4) Benchmark Project Performance: IT analyst firms are great at creating macro, industrywide data. But what you need is project data. For example, what's the average amount of time needed to install the kind of payroll system you're thinking of? This data is available from third parties, often at minimal cost.
5) Walk the Talk: Remember that project workers will fear being measured until you can show that the data is being used to improve the company's productivity. You must have senior-level people driving the measuring process: project-level people already feel they're the victims of unreasonable expectations. Show them that data will be aggregated to identify systemic problems — not just to punish individuals.
6) Monitor Performance — Quickly: Track your total IT portfolio in real time, not just quarterly or monthly. You want to know if the project is running over budget or late, of course, but you also want to know how it's faring on reliability, functionality, and complexity. Essentially, you want to see a yellow light while there's still time to make changes.
IT project success rates have doubled during the past eight years.
Source: The Standish Group International