This report describes an overall strategy that will enable most organizations involved in the utilization of project management "best practices" to improve their project outcomes by establishing a centralized project management office (PMO) framework strategy. Typically, most large corporations drive their IT initiatives in a silo fashion, by department or division, using the project management standards, guidelines, tools, and techniques of their own choosing. Often each of these silos maintain their own PMO, frequently referred to as satellite project management offices.
An enterprise-wide PMO framework strategy, as described in the following sections, has been developed through extensive research and information gathering sessions facilitated by TEC and by adopting the Project Management Institute's (PMI) A Guide to the Project Management Body of Knowledge (PMBOK) standards and the Capability Maturity Model Integration (CMMI) specific to IT initiatives published by the Carnegie Mellon University Software Engineering Institute. The findings and recommendations described within this document were developed through the collaboration of analyst team members at Technology Evaluation Centers Inc. (TEC) and input from external subject matter experts.
These recommendations, when suitably implemented, will deliver a robust and scalable project management framework strategy for both internal and external IT initiatives across the enterprise.
Technology is driving fundamental changes at every level of society—from how people shop, bank, travel, and play to how businesses organize and compete. Out of these changes a new business environment is emerging, in which the leading companies are those that can harness the power of the Internet and other technologies to reach more customers, manage their business more efficiently, to effectively address governance compliance and manage risk and how the stakeholders (employees, partners, vendors, and customers) interact. The research findings at TEC explain how to thrive in this new world, wherein businesses must embrace information technology (IT) across their enterprise.
It is becoming more evident that service and product providers must shift their strategic emphasis toward the application and exploitation of information technology in order to remain competitive.
Enhancing the performance of the technology environment of an organization is frequently achieved through the implementation of good project management principles and practices. Projects are a means to respond to requests that cannot be reasonably addressed within the organization's normal operational limits.
Some of the industries most affected by large and complex IT projects are the financial and health care sectors due to their large size and ever changing needs. Other drivers include the advent of new compliance requirements such as Sarbanes-Oxley SOX 404, Basel II, HIPAA, SAS 70 and the like. Typically, these requirements involve the implementation of IT controls and the associated business processes these controls support.
The most effective way to achieve and sustain regulatory compliance is through the automation of business processes, i.e. IT projects. Many enterprise applications are impacted by these internal controls from financials, enterprise content management, business intelligence to information security, it is often challenging to establish strategic IT initiatives that will achieve full compliance.
This shift in focus from work being performed by operations to work being performed through projects requires that an organization establish standard project management practices, including best practices, consistent processes, standards, guidelines, tools, and templates. To ensure consistency of execution and reporting, the organization must also provide appropriate project management training and a data repository for the timely and appropriate generation, collection, dissemination, storage, and ultimate disposition of project information.
This can be achieved through the implementation of a centralized project management office (PMO), often referred to as the project management center of excellence (PM-COE).
Strategic Report Overview
The following sections describes a structured framework for the successful implementation of a PM-COE/PMO for internal technology groups to effectively deliver on IT initiatives under the triple constraints—time, cost, and quality. The recommended framework is based on TEC's PMO model, which is consistent with the Project Management Institute's A Guide to the Project Management Body of Knowledge (PMBOK). The PMBOK provides a widely accepted reference for standards and guidelines, terminology, industry best practices, and knowledge of proven project management principles. The information provided in the PMBOK describes the generally accepted knowledge and practices that should be applied to most projects, most of the time. The project management analyst team at TEC has adopted this framework strategy in combination with client specific considerations, including the uniqueness of current projects as well as the cultural environment and stages of maturity and capability within the organization. This will ensure that the implementation of strategy recommendations will result in the optimal solution for any IT project-based organization.
In addition to the framework strategy outline in section 2, implementing the framework requires the acquisition, installation, and mandated use of a project portfolio management solution. The typical applications to provide a PMO centralized project portfolio management solution include main industry players such as Primavera, NIKU, PlanView, and more recently, MS Project with its continued enhancements. A product we are impressed with is the Business Propulsion Systems PPM product. The real time application capabilities built into the BPS product allows not only for near-real time reporting to executives (as opposed to waiting until the end of the month only to find projects are off track/out of scope), and its ability to provide the associated alerts and notifications based on user definable parameters. This product provides a strong advantage, especially when dealing with risk management initiatives around regulatory bodies such as Sarbanes Oxley, Basel II Accord, HIPAA, etc.
Impact of Project Failures
Based on studies conducted by the Standish Group (the Chaos Report) and other research groups, approximately 74 percent of all IT projects fail to achieve one of the three project constraints—cost, schedule, and quality. Such a failure rate within organizations today will have a substantial financial impact and dramatic results for the enterprise. The following table illustrates the need for any IT organization to improve project execution.
COST OF PROJECT FAILURE
- 81 billion (USD) per annum is spent on failed IT projects in the United States.
- 52.7 percent of IT projects cost 189 percent more than their original estimates (Standish Group Research).
- Organizations will pay an additional $59 billion (USD) for software projects that will be completed, but will exceed their original time estimates
- 10 percent of an organization's IT staff's time is wasted (per annum) on work that contributed no value to the business.
- More than $275 billion (USD) is lost per annum on approximately 200,000 application software development projects, largely because they lack skilled project management (in the US).
PROJECT FAILURE RATES
- 74 percent of all IT projects fail, are over budget, or do not meet original deadlines; 28 percent of projects fail in all of these categories.
- 40 percent of IT projects do not meet business requirements.
- 9 percent of development projects costing an average $2,322,000 (USD) by large companies, fail to come in on time and on budget.
- 75 percent of most Internet-based service projects fail.
- 31.1 percent of projects are canceled before they get completed
- 94 of every 100 projects are restarted; some have multiple restarts.
Centralized Project Management Program and Goals
As described in section 1, the implantation of a centralized PMO provides the advantages of higher project success rates and consolidated enterprise level reporting. In order to initiate the implementation of a PMO, the same principles that apply to IT initiatives apply here. As such, we have defined a PMO implementation by beginning with descriptions around standard goals, which can obviously be modified. The following simply provides a starting point for most organizations. Goals are an expression, in measurable terms, of what an organization intends to achieve from the execution of the project. To ensure that the PMO configuration initiative accomplishes the intended purpose, the project management group at TEC has established some primary and secondary objectives or outcomes it expects to realize from the successful execution of an enterprise PMO strategy. These eleven goals are consistent with the project management key success factors found in the benchmarking study, Best Practices of Project Management Groups in Large Functional Organizations, produced for PMI by Frank Toney and Ray Powers. This best practices report is a compilation of summary data and conclusions from a one-year project that looked at the key success factors for managing projects within large functional organizations.
It is imperative that this initiative achieves the following primary goals.
- Establish Alignment with PMBOK Nine Knowledge Areas
It is essential that the creation and implementation of project management processes and techniques be consistent with this internationally recognized standard. This will enable project managers to learn and apply the preferred, industry-accepted methods of project management, and will ensure that they are familiar with the concepts of modern project management.
- Begin the Adoption SEI CMMI Project Improvement Programs
Implementing the Software Engineering Institute's (SEI) Capability Maturity Model Integration (CMMI) is an indication of project management maturity. To achieve the SEI CMM Level-2 and subsequent Level-3, 4, and 5, an organization must demonstrate that it has a process for both project management and software engineering. It must show that the process is documented, standardized, and integrated into a standard software process for developing and maintaining software. This goal focuses on ensuring the alignment of the PMO strategy and the resulting project management maturity level with the requirements consistent with the five process maturity levels (initial, managed, defined, quantitatively managed, optimizing) of SEI CMMI.
- Improve Project Execution
Most executive management teams expect that all projects within the organization will be effectively planned and executed within the project management constraints of time, cost, and quality. This goal focuses on improving project efficiency. Efficient project management can be defined as on-time delivery, staying within the project budget, and producing a product or service with high quality. This is accomplished through the use of enterprise adopted tools, techniques, reusable templates, a lessons-learned repository, and practices centrally managed and maintained.
- Consolidate Project Reporting
Senior executive management personnel require current and accurate hierarchical roll-up of project data in order to make effective decisions. The focus of this goal is to consolidate and analyze project information relative to organizational interests. Achievement of this goal will ensure quality data, provide document control, and establish a single point of entry for project information and a centralized project reporting capability.
Consolidated project status information that can be not only accessed in real time, but provide alerts in real time will result in an organizations ability to react more efficiently in taking corrective measures towards ensuring successful project outcomes.
- Ensure Process Repeatability
Effective organizations reuse proven processes and templates, thereby eliminating the need to "reinvent the wheel". Here the focus is on developing, implementing, and maintaining a single project management process that guides how projects are initiated, planned, executed, controlled, and closed. This requires the PMCOE/PMO to plan and conduct methodology implementation, regular process reviews, and revisions, and to collect and analyze data on its methodology use and effectiveness. The methodology should provide consistency across projects relative to project planning, executing, and reporting. Having a methodology that provides a consistent approach to project management throughout the organization is a key attribute of a maturing project management organization.
- Implement Portfolio Management
Due to limited resources within any organization, not all of the proposed projects can be carried out. Although some portfolio management is done at the departmental PMO level, a higher level portfolio management function must also be implemented at the centralized PMCOE/PMO level. Measuring project performance and the impact of project outcome on the project requirements is the focus of this goal. Capital expenditures, project duration, expected costs and benefits, and human resource utilization all affect the long-term achievement of the executive team business decisions.
- Executive Sponsorship
It is critical for executive management support initiating, promoting, and funding a PMO initiative. A strong sponsor is required to ensure the successful implementation of a PMO. The sponsor is expected to establish the steering committee, communicate business goals, strategies and requirements, ensure resource availability, facilitate implementation progress communications to executive, provide guidance in line with the implementation plan (charter), and appoint the PMO director with the associated authority parameters.
These items represent the critical goals of the implementation of a centralized project management initiative.
Additionally, there are some secondary goals that also should be pursued. They are listed below, and most of these goals can be achieved simply as a result of achieving the primary goals.
- Improve the Project Management Environment
Effective project management training, consistent with PMI's PMBOK along with the support and tools provided by different products will enable the executive management group project management organization to achieve professional status. This goal is directed at establishing competency requirements for all project partners, helping individuals meet skill and competency requirements through training and certification programs, and formalizing a career path for project managers within the organization.
- Attract and Retain Quality Staff
As an organization achieves recognition for its project management leadership, it will attract and retain highly skilled project management professionals. It is anticipated that a supportive project management environment, resulting from the primary goals being met, will go a long way in attracting new project managers. A good project manager is a scarce resource, so this goal focuses on taking a proactive approach in developing programs aimed at attracting, selecting, retaining, and rewarding top-performing project managers.
- Recognize Savings
As stated in the Standish Group Chaos Report, project failure is very costly to an organization. By improving project execution, and project success rate, the organization can achieve substantial cost savings through implementation of the core strategy team's recommendations.
- Establish Staff Mobility
This secondary goal is a by-product of implementing a standard methodology and requiring consistent planning, executing, and reporting throughout the organization. By establishing consistency with PMBOK, the project management environment practices will be consistent within project management execution using common terminology, standards, processes, and policies. As the related primary goals are achieved, project managers can be moved across business units with little disruption. Furthermore, it will be expected that a project manager could be "parachuted" into a project, taking it over, and becoming productive fairly quickly. This is often referred to as matrix resourcing.
Project Portfolio Management Software Solutions
Most of the key PPM vendors are mature and well positioned as a result of the many years in the PPM solution arena. Main players like Primavera, NIKU, PlanView, and others have a market stronghold in managing projects of all sizes and scope. That being said, comparatively newer, up-and-coming organizations like Business Propulsion Systems (BPS) should be recognized not only as visionary for their real time capabilities, but for developing and offering solutions that address the components outlined within this document.
BPS can be positioned as a market leader because of its project management methodology within its PPM solution, which addresses traditional IT project solution criteria, and provides compliance solution capabilities. It manages the operational processes associated with compliance and audit functions—which are the most challenging issues for global financial services, insurance, health care, and other organizations. Solutions built in this scope have the capability of managing project portfolios, programs, projects and resources with necessary diligence; managing IT and corporate governance; providing enhanced processes, tools, and best practices methodology support; improving project team collaboration; and supporting and measuring progress toward project initiative objectives.
In most cases, when organizations implement a centralized PPM solution, they will continue to use a project management tool like MS Project at a project level for everyday tasking, scheduling, and resourcing. It is important for any organization, when evaluating a vendor solution, to centralize their PPM functions, methodologies, and standards so that they ensure the application has the ability to seamlessly interface with products like MS Project and even Excel.
Moreover, governance is a hot topic in the corporate world today. Recent corporate scandals have resulted in Sarbanes-Oxley (SOX) 404 and other regulations. Solutions that address these laws are commonly referred to as governance and risk management. Ultimately, no project management vendor can claim to be in full control of compliance issues. However, BPS solution has the unique capability to manage and handle the overall operational and corporate risks as a centralized real time application solution, which may help organizations meet new governance requirements.
The framework described in this document provides a baseline strategy for the implementation of a centralized project management office. The mandate behind this research was to provide an optimal solution for large project-based organizations. This was accomplished by researching proven and widely accepted project management knowledge, practices, and policies. This framework was established to improve the professional project management environment, to mature project execution, increase project success rates, and reduce costs. For any PMO strategy to be successful, it must be aligned with the organization's business model, strategies, and goals. Considerations such as current PM maturity, corporate culture, and unique characteristics within current projects are key in formulating the final PMO framework.
Achieving successful adoption of a new PMO should involve influencing the project management environment by providing useful tools, training, reusable templates, techniques, and methods that improve the project manager's ability to successfully execute—not mandate. The concept is not to add more work for the project manager, rather to provide an effective and supporting infrastructure. The PMO also operates as the internal entity that can provide executive management with accurate and up-to-date departmental and consolidated project status reporting.
In order to achieve this, we have put a strong emphasis on evaluating and selecting the right project management information system (PMIS) or PPM. The PPM solution should be flexible enough to support the PMO framework strategy while, at the same time, be scalable. A large component to bettering project execution is continuous improvement as described in the SEI Capability Maturity Model. As such, the PPM solution should have the ability to grow as the project management environment matures.
About the Author
Grant Jonasson has over twenty years of experience in information technology, computer consulting, and project management covering a broad range of industry sectors throughout Canada and the United States. He has an extensive skill set in executive level management, IT consulting, project management, and client care management. With a Bachelor of Commerce degree from the University of Alberta, he has authored numerous articles and white papers, given IT-related lectures and presentations to a number of multinational clients, and delivered courses at the Westerra Technology Institute in Edmonton, Alberta (Canada).
Book Project Management Institute. Project Management Body of Knowledge. 2000 edition.
Standish Group, The Chaos Report 1994.
Carnegie Mellon University Software Engineering Institute, Capability Maturity Models.
Toney, F. Powers, R. (1997, June). Best Practices of Project Management Groups in Large Functional Organizations. Project Management Institute
Frame, JD. (2002). The New Project Management. (2nd ed.). San Francisco: Jossey-Bass.
QED Management Sciences. Strategic and Operational Planning for Information Technology Services.