8-Steps to Get PPM Off the Ground

By Jeff Monteforte

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Whether it's a growing dependency that businesses have on information and technology, too many projects to get done, or the increasing pressure that CIOs are under to cost justify IT spending, a clear prioritization and funding strategy for IT investments is essential in today's business environment.

The industry solution that has come to the forefront is project portfolio management (PPM). PPM is all about aligning technology funds, projects, and IT resources with the company's organizational priorities.

There is no one right way to build a PPM process. This is evident in the fact that there are dozens of books on the topic and dozens of software vendors promoting a variety of products and, of course, each one claims that their way is the best way to solve the PPM puzzle.

Yet, my experience has shown me there are specific "best practices" that are common across all PPM methodologies and form the foundation of our company's PPM methodology:

Keep it simple. Don't start by looking for a PPM system to purchase. While each software product has its own approach to portfolio management, it also inherently has specific strengths and weaknesses caused by that approach.

Unless you know the exact approach you want to take to manage you project portfolio you don't know which software will be best for you. So, for starters, use the tools that you know best. For most people that means your favorite spreadsheet application and word processor.

Look for direction from the top. Assemble business executives into an IT steering committee and schedule monthly meetings with the intent of reviewing new project requests and current project progress.

At the first meeting, use the IT steering committee to gain the required perspective on company priorities and value. Whether its increased revenue, customer retention, or cost control it should be your business leaders that tell you what is most important today.

Build a centralized view. Build a single collection of all active and requested IT projects along with their vital informational facts, such as name, sponsor, scope, estimated costs, estimated time frames, and assigned IT resources.

To make certain a comprehensive inventory is built, ensure that IT submits all IT-specific projects as well; such as server consolidations and network upgrades. Keep in mind that your first attempt at collecting all the data will be a chore, so keeping the initial database simple is critical. Initially, a spreadsheet works best.

Categorize your projects. There are three fundamental types of IT projects that you need to get your arms around. Organize your projects into the three categories of operational, incremental or strategic.

Operational projects are non-discretionary activities needed to keep the business running. These include, for example, application support activities, regulatory initiatives, and infrastructure build-outs. Don't be surprised if you discover that over 75% of all you IT project work falls under the category of operational.

This is a typical starting point for most companies and it should become an annual IT management goal to continually reduce this percentage and transfer savings over to the discretionary spending pool.

The incremental and strategic efforts are discretionary initiatives that provide some form of incremental upgrade or new capability that is expected to add value to the company.

Incremental projects are typically small efforts and number into the hundreds for a large company. These projects should be prioritized and managed at the business unit level and not by the IT steering committee.

Strategic initiatives are typically significant investments and warrant the attention of the company's top executives. It will be these projects that get assessed by the portfolio management process, as well as evaluated for priority and funding by the IT steering committee.Give it the smell test. The best portfolio management practices utilize a two-step assessment approach that, in a sense, separates the "wheat from the chaff."

It first evaluates efforts at a 10,000 foot view so that a tiered listing of projects can be built. This organization of projects should segregate the investments with the potential of delivering the most business value from those projects considered mediocre investments and projects that, if pursued, will remove value from the business because they have a negative return-on-investment (ROI) potential.

Because of this, a pragmatic method of scoring and weighting the identified strategic initiatives is needed.

One approach is to score each effort on two or three high-level, uncomplicated measures. For example, I have worked with several companies that have built a preliminary evaluation process that scores each project on a scale of 1-to-10 for such measures as alignment or "support of current business goals", potential ROI, and project risk. The scores are then used to generically rank the project ideas from good to bad.

Develop a business case. For those project ideas that pass the "smell test," a comprehensive business case that expands and deepens the analysis of the project's characteristics should be pursued.

The business case analysis (BCA) is the primary tool used by the executive steering committee to support or deny decisions of investment.

The BCA must provide insight into whether your company should build or buy a system, as well as a review of preferred solution's technical architecture. It must provide decision makers the necessary information regarding project scheduling and resource forecasts.

Additionally, the BCA must drill deep into the financial aspects of the project, determining initial and ongoing costs, as well as refined and expanded ROI measures.

There are four rules of thumb that I follow that are essential to producing a successful business case:

  • Different executives make financial decision differently, so use multiple ROI metrics. It is normal for your steering committee to ask for financial returns expressed in terms of multiple metrics, such as payback period, net present value, and internal rate of return.
  • Calculating the ROI for a technology project isn't an IT-only effort. The business users must define the benefits associated to the project being measured, since the business owns the benefits.
  • If it takes more than a few weeks to evaluate a project, then the business-case method is too complex. If an investment of 80 hours from IT and business staff can not produce a viable BCA for a standard IT project then the process needs to be simplified.
  • If the financial measurements attached to an IT project are to be accepted throughout the company, then an authoritative representative from the Finance department needs to support and verify your method, as well as the ROI calculations.
  • Prioritize. By establishing business leaders as the IT steering committee and ultimately as the IT portfolio managers you are well on your way to ensuring business-IT alignment.

    Use the IT steering committee to gain the perspective of senior business executives on enterprise priorities. The derived list of prioritized IT projects results in the increased alignment of IT investments and enables more efficient allocation of IT resources to the most strategic and valuable business initiatives.

    Apply resources. Managing the IT staff as a single pool of delivery resources is the proven approach to providing efficient and rapid sourcing to business projects. Once you map the available IT resources (those not consumed by the non-discretionary activities required to keep the business running) to the highest prioritized business projects it becomes apparent that the discretionary IT resources are a limited commodity.

    Utilize the IT steering committee to address this issue of limited IT resources by having them, along with the CIO (if you have one), establish a sourcing strategy that enables resource pool flexibility and minimizes constraints of critical roles and skills.

    A recent Forrester survey of 269 IT decision makers stated that 83% of companies are in the process of adopting PPM as the way to meet today's challenge of business/IT alignment.

    Having a practical approach to establishing this discipline in your organization is essential to gaining the support of business executives, the long term adoption of portfolio management and accomplishing the successful alignment of business and IT.

    Jeff Monteforte is president of Exential, a Cleveland, OH.-based information strategy consulting firm, which specializes in IT governance, information security and business intelligence solutions. He can be reached at jmonteforte@exentialonline.com.