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Achieve more with less!

The status of project portfolio management in IT

Achieve more with less!


The status of project portfolio management in IT

Achieve more with less! The status of project portfolio management in IT

Achieve more with less! The status of project portfolio management in IT Published by PricewaterhouseCoopers Written by Philipp Emslander, David Basten and Marcus Messerschmidt Supported by Hans-Martin Wegner, Stefanie Klammer and Heiko Fuckerieder Special Thanks to Christiane Mnz and Andrea Williams

2009 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

Achieve more with less! The status of project portfolio management in IT

Introduction
During the autumn of 2008, the German economy was in the grip of the financial crisis along with the rest of the world. Budget reductions and the paring back of investments were knee-jerk reactions to the crisis; IT budgets and projects were not spared. The question of which projects could be stopped or postponed without causing a lasting strategic disadvantage took centre stage next to cost reduction. The experience from our projects over the past year has shown that reducing the number of projects and increasing the focus on projects that lead to a rapid return on investment or significantly support the business strategy leads to higher project efficiency. "Achieve more with less" - which sounds at first like an impossible task - can indeed be the end result of portfolio rationalisation. With the right methods and processes this goal is achievable and efficiency can be improved. The purpose of this study is to validate the patterns that we recognised during our projects by demonstrating a representative cross section of the state of IT project portfolio management (PPM) in several of Germanys leading organisations. We surveyed 22 organisations representing several industries, including eleven 1 listed on the DAX , eight global German organisations and three Swiss organisations. We found that the size of the organisation did not affect the selection of the process components implemented (e.g. financial business case, prioritisation methods, etc.), but very much influenced the speed of implementation. We would like to thank all of the participants in the study for their cooperation. A major conclusion of the interviews we conducted was that establishing PPM is not a leisurely stroll, but rather a challenging climb that requires endurance, perseverance and often, a new way of thinking. In the following chapters we look at typical project portfolio management issues, point to critical success factors and highlight implementation examples. We hope you find this an informative read as you accompany us on the climb to the summit! Dsseldorf, September 2009

Marcus Messerschmidt Partner PricewaterhouseCoopers

Philipp Emslander Senior Manager PricewaterhouseCoopers

The 30 major companies in Germany trading on the Frankfurt Stock Exchange

Achieve more with less! The status of project portfolio management in IT

Table of Contents
Introduction........................................................................................................... 3 Table of Contents ................................................................................................. 4 List of Figures....................................................................................................... 5 A .. Looking Back - PPM as an instrument for effectiveness ............................... 7 B .. The Objectives of PPM ................................................................................ 10 C .. Premises for achieving the objectives of PPM............................................. 13 D .. PPM process: is there a standard?.............................................................. 25 E .. Tools: Enhancing the effectiveness of PPM ................................................ 27 F... Outlook: what is on the agenda? ................................................................. 29 About us ............................................................................................................. 31 Contacts ............................................................................................................. 32

Achieve more with less! The status of project portfolio management in IT

List of Figures
Fig. 1 Fig. 2 The four essential questions of IT management................................ 7 Optimisation of cost and value through project portfolio management ...................................................................................... 8 Where are the study participants? ................................................... 11 Gantt Chart Example with Change Tracking ................................... 14 Co-ordination between IT and business as a critical success factor in the joint planning process .................................................. 14 Strategic Buckets by organisation structure .................................... 18 Strategic Focus Areas...................................................................... 18 Example of a scoring model............................................................. 19 Example of a budget distribution...................................................... 19 Benefits management example ....................................................... 21 Significant benefit categories ........................................................... 21 Cost versus realisation of benefits ................................................... 22 Identification of Dependencies & Synergies .................................... 23 PPM process components ............................................................... 25 The evolution of IT as a partner for strategic innovation ................. 29

Fig. 3 Fig. 4 Fig. 5

Fig. 6 Fig. 7 Fig. 8 Fig. 9 Fig. 10 Fig. 11 Fig. 12 Fig. 13 Fig. 14 Fig. 15

Achieve more with less! The status of project portfolio management in IT

Achieve more with less! The status of project portfolio management in IT

A Looking Back - PPM as an instrument for effectiveness


Prioritising projects and making investment decisions are not new concepts Project Portfolio Management is not a for managers. Managements aim has always been to focus efforts on the new concept right priorities. Most organisations initially had to create the basis for properly functioning project portfolio management (PPM) which consisted of establishing effective working methods, for example through the standardisation of project management and in the creation of a monitoring procedure that consistently revised the achievement of objectives according to the factors of project selection, time, quality and budget (Fig. 1). Due to the increasing complexity of corporate structures and their international economic integration, the number of projects an organisation has ongoing at any one time has increased, as has the importance of project portfolio management (PPM) to senior management.

Frequently neglected by business and IT management 1. Are we focussing on the right topics?

Normal focus of IT management

2. Are we working efficiently?

4. Are we achieving the anticipated benefits?

3. Are we achieving the objectives on time and to budget?

Fig. 1

The four essential questions of IT management

Project portfolio management emphasises effectiveness and selecting the right focus areas. Especially in times of limited resources, it is crucial that the projects that will bring sustained added value to the organisation are initiated. This long-term view which focuses on value creation is however, not something that many organisations take. Shifting away from this view requires a fundamental change in mindset and often a cultural change to overcome short-term tunnel vision. After PPM has been established, an organisation can decide on its value creation approach (Fig. 2): Increase the value creation share of projects without increasing expenditure (C); or During lean times, achieve the same level of value creation as before the establishment of PPM (B) but with less expenditure.

It is crucial to select projects that will bring sustained added value

PPM works on the principle of value creation

Achieve more with less! The status of project portfolio management in IT

100% of the added value, same costs Same added value, 60% of costs Added value B C

A 60% of the added value

Costs
Fig. 2 Optimisation of cost and value through project portfolio management

PPM provides greater transparency into all corporate activities, leading to an improved project mix. Projects that will not add any value or those that involve high risks will not be started or can be stopped. Change management is crucial to the success of PPM. It is very clear that in addition to methodology, change management plays an important role in the success of PPM adoption as greater transparency of portfolio planning creates resistance within the organisation. Typical perceived barriers include increased bureaucracy, slower decision making, and decisions being made in isolation and without sufficient expertise. The vast majority of study participants stated in interviews that they consider a supportive communication strategy which complements the new processes to be a key success factor in PPM adoption.

Achieve more with less! The status of project portfolio management in IT

Achieve more with less! The status of project portfolio management in IT

B The Objectives of PPM


The stages of PPM: Transparency, Alignment, Strategic Planning and Benefits Realisation. The objectives of establishing IT project portfolio management are ambitious: PPM prescribes creating a robust decision process for choosing the right investments and ensuring better management of projects with the specific aim of reducing costs and/or creating competitive advantages. In this context the practicality of the underlying project portfolio management processes becomes increasingly important. The interviews identified four objectives that suggest a specific common sequence. If the organisation has transparency of their project landscape, the emphasis in the PPM process shifts to the interface between business and IT. Organisations who want to realise benefits or have processes in place to do so have already gone through the stages of transparency, alignment and strategic planning. The following provides a summary of the four consecutive stages of IT PPM. Stage 1: Transparency The introduction of project portfolio management is intended to bring transparency into the project landscape: projects must be compared with each other. Having a project overview helps identify important issues and improve project planning. Transparency is the basis for progression through the consecutive PPM stages: "The project portfolio gives us transparency as to what projects are implemented where and when." Stage 2: Alignment Project portfolio management is intended to improve communication and coordination between IT and the business, enabling better alignment. For this purpose the required roles and organisational structures are created. "The project portfolio is the basis for discussing the coordination between business and IT." Stage 3: Strategic Planning Project portfolio management should improve business strategy implementation. "The project portfolio management process is the key instrument for guiding the implementation of the strategy." Stage 4: Benefits Realisation Project portfolio management is intended to contribute to more sustainable, successful projects (in terms of time, budget and quality) being completed to realise proposed benefits. "Project portfolio management has helped us to increase significantly the added value of our investments through raising the plausibility of our decisions." Where are the study participants? All of our study participants have transparency into their project landscape, the basic stage. Roughly 40% of study participants are working at level 2 "Alignment", with half of them already looking to the strategic focus of the next stage. About one-third of study participants are at step 3 "Strategic Planning" and dealing with strategic issues, with nearly 10% of them at the 4th Stage "Benefits Realisation". However it is important to note that only about 10% of the study participants (Fig. 3) are realising their benefits and management expectations.

Transparency and IT alignment are essentially ensured. The agenda continues to focus on: strategy planning and benefit review.

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Achieve more with less! The status of project portfolio management in IT

50% 41%

Proportion of Study Participants

40% 30% 20% 10% 0% Transparency Alignment Stage Achievement 14% 14%

36%

23%

9%

9% 0%

Strategy

Benefits Realisation

Planning for next Stage

Fig. 3

Where are the study participants?

There are two factors influencing this distribution: Implementation takes time: the organisations that are at the benefits management stage generally have many years of experience in portfolio management and in benefits management. Organisations claim to be satisfied with the benefits achieved so far and do not yet see a reason to take the next step.

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Achieve more with less! The status of project portfolio management in IT

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Achieve more with less! The status of project portfolio management in IT

C Premises for achieving the objectives of PPM 1 Transparency: establishing the foundation
Transparency establishes the foundation for the selection and control of projects.

The organisations we surveyed uniformly confirm the following: the consistent use of project portfolio management provides project landscape transparency as the basis for the selection and management of project portfolios.

Features Project applications are usually standardised at this first stage of project Standardised project applications portfolio management. With defined Key Performance Indicators (KPIs) and serve as a basis for comparison. task criteria such as time, effort and cost, they offer an overview of the projects in the form of control. Projects are consolidated using the bottom-up principle. Portfolio control is assured through use of projects lists, Gantt charts and information on costs and overall budget. Project management is as a rule also standardised. The use of Quality or Stage Gates offers accurate status reports at each of the project's key milestones. The organisations that have set up a project portfolio management office (PPMO) report that it is valued by management. Middle management however, sees no value in this body and adopts a defensive attitude to the new decision-making processes and project landscape transparency. Typical Issues Often existing capacity is not sufficient to undertake all projects within the There is no basis for critical project required time frame. Many projects are classified as mandatory (for comparison. regulatory, technical, or strategic reasons). Only a few of projects have a business case and a defined return on investment (ROI). Moreover the quality of business cases, particularly in relation to benefits management cannot usually be monitored. Often only the IT issues and the cost projections can be understood and the numbers are not trusted, complicating the decision-making process. Another issue is that for projects that are initiated by the business, IT is often not involved until very late on in the planning process. Existing dependencies on other projects, technical or resource constraints or IT bottlenecks may then lead to delays in project execution. Often requirements are simply implemented without further analysis to determine if they lie within the existing budget, effectively wasting an enormous potential for savings. Next Steps and Best Practices The participants confirm that senior management only has a sound basis for Project Portfolio Management decision making when they are aware of all projects. During the second requires discipline by all, particularly stage of project portfolio management, the business processes are put in Senior Management. place to use this transparency in a meaningful way but change management and communication is of particular importance to ensure full understanding of the value of this transparency. In this context communication is of particular importance. Another success factor is discipline and rigour, especially true for senior management: project portfolio management will only generate a benefit if senior management complies with the relevant processes and rules. A typical Gantt chart report on the active and planned portfolio might look as follows (Fig. 4):

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Fig. 4

Gantt Chart Example with Change Tracking

In addition to the individual filtering capabilities of the organisation, it is important that the changes from the previous plan (e.g. new projects and postponements) are visible, which either have not yet been approved or their impact on other portfolio projects is not yet known.

2
Key Account Structures on the IT and business side establishes a common language

Alignment: providing a common vision

Features If there is transparency in the project landscape, the next stage aims to improve coordination between IT and business units. The development of key account structures on both the IT and business side has proven to be very useful for this. In both IT and in the business, roles are created (e.g. Demand Manager on the IT side and Process Owner on the business side) that combine technical and specialist knowledge, enabling them to speak a common language (Fig. 5). In general, these positions will have a functional form which means, for example, that a sales process expert talks to his counterpart on the IT side (e.g., Business Unit Sales IT).

Business Products/ services Sales channels Functions Application

IT Operation Infrastructure F&E

Sales increase Cost reduction (business) Cost reduction (IT)

Fig. 5

Co-ordination between IT and business as a critical success factor in the joint planning process

Pure IT projects (network changes, etc.) are usually structured in such a way that IT also assumes the business function and project expertise. Our interviews revealed that coordination between IT and business is further facilitated if both the business units and IT use the same project management methods. Some study participants are already considering the topic process map and enterprise architecture, two tools which provide a better understanding of the relationships between business processes and supporting applications.

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According to the study participants, a critical success factor is the A good business case leverages completeness of the business case to support the comparability and the experience. prioritisation of projects. This is a further development of primary IT cost analysis still in the foreground during the introductory stage of "transparency". Our study has shown that the organisation must be introduced to the concept of a more rigorous business case gradually. We found that organisations which produce a financial business case for each project have had an established process in existence for more than three years. To be able to measure the impact of projects on the business, some study participants have defined selected business performance indicators (BPIs) which form the basis for managing the core business. The projects must then show how they influence the BPIs (e.g., time to market, stock turnover). Typical Issues The bottom-up approach in project consolidation often generates too many project requests with most of them classified as high priority. Lack of crossbusiness prioritisation reduces the capability of the organisation in balancing and optimising the project portfolio. Since at the alignment stage there is usually no strategic planning in relation to the project portfolio budgets and goals are as a rule defined independently of the benefits in functional business units. There is no mechanism for cross-unit optimisation of the portfolio; control, such as the reduction of budgets, is usually applied generically across the board. Next Steps and Best Practices A strategic IT and business planning process lasts beyond fiscal year end. This is important because IT projects can have a multi-year lifecycle and dont come grinding to a halt on the eve of fiscal year end. Top-down targets should be derived from the planning process to mitigate the risk of project proposals which inadequately support the business strategy. With the establishment of budget balance mechanisms across functional areas, the project portfolio can be improved even further. An important element of portfolio management is having the project data needed for informed decision-making. The focus of portfolio management is generally on the financial resources but in many cases the human resources constitute the real bottleneck. Resource management can help optimise the use of key resources: by reducing waiting times and focussing work, project timelines can be reduced. Additionally, project efficiency (higher net present value, NPV) increases, as fewer expensive external resources need to be engaged. The organisations surveyed used the following methods to optimally deploy key resources: classification of resources (external vs. internal key people), only monitoring resources that cannot be purchased on the open market, integration of resource planning for key resources in the portfolio planning process, tactical and strategic planning for key resources and eliminating bottlenecks, avoiding excessive burden through too detailed and complex time tracking,
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A large number of high-priority projects and generic control prevent cross-functional optimisation of the portfolio.

The adoption of strategic planning leads to the next stage of PPM.

Resource management increases the efficiency of projects. The focus should be on key resources.

Achieve more with less! The status of project portfolio management in IT

focus on a maximum of two projects per resource, support for resource management through a central application that analyses and facilitates the implementation of the process.

Effects are discernible only in the medium to long term.

A challenge of this measure is to maintain the momentum for more than a year. During the first year there are no benchmarks against which to justify the improvements against the comparative cost of establishing the process. All organisations that have proceeded to this stage have improved how they identify potential bottlenecks and have achieved sustainable improvement. Besides the pure process and application issues that are discussed at the interface between business and IT, our experience shows that the increasing introduction of transfer pricing rules and penalty provisions are additional factors that must be considered both in planning and controlling cross-border transactions and in the documentation of transfer pricing. The following illustrative and non-definitive transfer pricing aspects should be considered in the context of cross-border IT projects: The cross-border use of resources can result in secondment which has associated tax implications. The support and distribution of research and development expenditures should be documented in the form of service provisioning contracts as part of a central structure. If centrally funded development units or foreign services are provided the settlement process should be compatible with external regulations so that these benefits can be recognised for tax purposes. The cost of centralised IT project management should be borne by the appropriate IT system users with distribution rates set accordingly. Appropriate documentation should explain the benefits for the IT system users to ensure recognition for tax purposes. The licensing of software may require contracts and a determination of the license fee. The funding of IT projects can be provided by a group unit. Interest rates or possible guarantees must be considered for this. The centralisation and transfer of intangible assets such as program keys, technologies and software, may require a tax adjustment.

Transfer pricing and penalty provisions must be considered.

Strategy: setting the cornerstones for implementing business strategy from the topdown

Features Once business and IT have an aligned business planning process the challenge becomes the bottom-up consolidation of a large backlog of planned activities equating to a corresponding excess in the budget. There are usually no mechanisms for balancing the budget between individual areas which are normally structured in terms of specialisation and business function. This can be countered with a few selected methods that we will explain further later on to promote better alignment with the strategy of the group as a whole.

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Achieve more with less! The status of project portfolio management in IT

The most important change at this stage is to introduce top-down project control. This conversion is usually gradual and iterative. Senior management sets the focus and context parameters in line with the strategy, such as the initial budget to avoid massive over-planning and reducing the complexity of the consolidation of project results. For this approach to be effective, the appropriate measures, performance benchmarks / key performance indicators and prioritisation methodology must be derived from the organisations strategic planning. This is governed by the golden rule: less is more. Three to four business performance indicators should be used that can be tracked and measured by everyone (e.g., time to market, on-time delivery of supplies, response times for customer inquiries) in addition to a prioritisation mechanism characterised by simplicity and transparency.

The change from bottom-up consolidation to top-down planning reduces budget and project backlogs

Another basic support for corporate governance is the central release of Central budget release improves budgets, portfolios and projects. For all study participants whose focus was implementation. on improving the implementation of strategic planning, the composition of the project portfolio and detailed planning were carried out within business units with the final decisions on releasing the budget and project initiation being made centrally. In the event of a conflict or issue, a central body can re-allocate resources and make any major changes required, creating an effective feedback loop. Typical Issues One of the biggest challenges in integrating the strategic planning process is Long lead times slow down decision keeping the lead time as short as possible and not paralysing the making. organisation through an extended planning phase. During the course of the interviews we found that the lead time and the stability of the project portfolios were very dependent on the speed of change in the organisations industry sector. Product life cycles, market environment and the infrastructure affect the dynamics of planning and should be allowed for in the time plan. Most of our study participants have established a quarterly review of the portfolio with the number of adjustments made varying considerably. Top-down planning also deals with the conflict between centralised and Ownership of decision making is distributed units. This needs to be carefully considered to determine where unclear. sufficient expertise lies within the organisation to be able to review the decisions and where the necessary decision-making powers to reallocate budgets reside. The results from the survey are consistent with our experience here: we recommend the creation of cross-sector working groups which have sufficient proximity to the technical content and can prepare decisions for the existing decision-making bodies. Another typical phenomenon is the proliferation of strategic projects. This needs to be controlled at an early stage otherwise the governing bodies will be left with no room for manoeuvre. It is helpful to define exactly what is seen as strategic and who can initiate a strategic project to ensure that this definition is strictly observed at all levels. Next Steps and Best Practices The following methods create the foundations for operationalising the strategy and the creating the initial benefits management route map. The first building block of strategic planning is defining Strategic Buckets. These originated in the area of product portfolio management and allow for the subdivision of the overall portfolio into different sections optimised by a main controller under centralised, prescribed rules. Our interviews revealed Strategic Buckets help distribute responsibilities across the portfolio. There are too many strategic projects.

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that the study participants who use strategic buckets can be divided into two groups. While one group strategically groups according to the organisation structure (e.g. distribution channels, functions or products) (Fig. 6), the other determines the buckets by strategic focus areas (e.g. opening up new business areas, optimising patents, improving existing products) (Fig. 7). The core principles are the same in each case: the appointment of a Bucket Owner who does the prioritisation within the buckets, the definition of rules (priorities, target KPIs at the bucket-level) to which each Bucket Owner must adhere and the determination of the initial bucket size.

Business Products/ services Sales channels Functions Application

IT Operation Infrastructure F&E

Sales increase Cost reduction (business)


v

Cost reduction (IT)

Fig. 6

Strategic Buckets by organisation structure

Develop new business segments

Optimize patents

Improve existing products

Innovation

Favorite employer

Fig. 7

Strategic Focus Areas

Priorities should be derived from strategy in a way which can be easily undersctood.

Deriving priorities from strategy ensures that they can be easily understood and that the individual components can be used for discussion by management. A decision based solely on the calculated prioritisation value in the organisation will not be sustainable. One approach in deriving a scoring model from the strategy is to provide a series of questions that can be answered with a simple yes or no. The objective here should be to build on readily available information, such as competitive analysis and strategic development plans. The following example shows the possible structure of this kind of scoring model, based on prioritisation criteria identified by the study participants (Fig. 8).

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Set priorities Am I creating a competitive advantage? Is this a strategic focus area? Does it concern a core area of the company? Can the result also be used in other areas? Will the degree of standardisation increase?

Derivation of the scoring model

Bucket Product management Supplier management Order Sales Check-out Warehouse management Disposition Actual

Below average

At eyelevel

Market leader

Strategic focus x

Core area

Company standard

Purchasing

x x x

x x x x

Logistics

Theoretical

Fig. 8

Example of a scoring model

Determining the initial size of the buckets is a key challenge at the beginning of the planning process. The following model demonstrates how historic plan sizes combine with top-down planning and a simple cross-bucket adjustment mechanism (Fig. 9): 70% of the budgets are allocated based on the budget values of the previous year. 20% are used to set the strategic priorities top-down. 10% are available for a cross-bucket distribution, based on business cases (i.e. best of the rest).

A balanced combination of budget methods facilitates the initialisation of strategic buckets.

Business 10% 20% Products /services Food Drugstore 70% Clothing Accounting Sales channels Branches Online Functions Sales Logistics

new products Time to Market Opex 15% 5%

Food

Logistics

Fig. 9

Example of a budget distribution

Through this approach budget consistency is maintained and the starting points for control by central portfolio coordination are established. Establishing this budget distribution takes some time but by adjusting the percentages year-on19

Achieve more with less! The status of project portfolio management in IT

year, the level of control can be adjusted to a more centralised or decentralised model as desired. It is important to develop a holistic view. In addition to the methodology, the holistic view is of crucial importance. Employees need to develop an understanding of the overall project portfolio because in addition to functional experts, those with a good overview of the business areas and their associated processes and a holistic understanding of the organisation will be needed. This high-level holistic view can be used to identify synergies and overlaps and to integrate detailed knowledge during project assessment. In general, the organisations surveyed did not have these types of resources readily available but the development of such know-how, where it existed, proved in practice to be a success factor. With the size of the central organisation, the role of the PPMO plays a central role: Pure corporate governance units, depending on the size of the organisation, averaged out with two to five employees. As soon as more rigour was introduced around business cases this resource requirement correspondingly rose to two figures.

The norm is that the focus of the PPMO is on corporate governance while relying on individual business units for expertise on specific issues (e.g. existing IT-Controlling).

Benefits management: securing the realisation of benefits

Features The organisations that have embedded benefits management in their PPM process share a number of similarities. Firstly, in reviewing benefits they differentiate between the project level and portfolio level. Secondly, these firms have defined bodies that are responsible for monitoring the achievement of benefits: when deviations from the objectives occur they conducted detailed reviews of the projects concerned. The benefits at portfolio level must build on the control of parameters that can be understood both by IT and the business. These can be core operational KPIs (e.g. time to market) or financial metrics (ROI, NPV). The Portfolio or Bucket Owner must bear in mind how the measures will achieve the stated overall objective (e.g. reduction of operating costs by 5%). The consideration at portfolio level also helps identify synergies that cannot be gleaned through a simple reading of the individual measures. Benefits must be defined precisely and be understoof by both IT and the business. If overall objectives are not achieved at the portfolio level or if some projects already in progress are deviating from original targets (budget, quality, time), planned project reviews need to be carried out to understand the deviations. This phased approach ensures that the potential overhead for retrospective calculation is reduced to a reasonable level (Fig. 10).

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Conditions at the portfolio level Consolidated benefits to central KPIs: methodology for the analysis and tracking of synergies Goal deviation: analysis of the deviations and possible performance of project calculations

Conditions at the project level Definition of the effects on KPIs Definition of deliverables/ recognition events at the beginning of the project Project acceptance based on defined deliverables/recognition events

PwC Best Practices Avoidance of detailed business case reflections and recalculations

Fig. 10

Benefits management example

The basis for benefits management is a clear definition of the expected benefits of projects. In the following graph, the three main benefit categories are listed which play a role in the portfolio management process (Fig. 11):

Defined monetary value or with A impact on selected Business KPIs (e. g. Time To Market)

Benefit consolidation at portfolio level and exception handling in case of deviations.

B Quantifiable, but project specific

In case of exceptions a review of the defined, project specific targets.

Diificult to quantify, C only qualitative description of the expected benefits

Recognition Events: defined checklist of items, that is reviewed and accepted at project closure.

Fig. 11

Significant benefit categories

One benefits management success factor is to ensure that the level of detail of a business case is commensurate with the amount of investment. However this must be done precisely enough so that it is clear after project completion if the benefits have actually been achieved. One example is to define recognition events: the events, processes or changes after the successful completion of the project. The following graphic provides a simple example of how the expected benefit effects relative to a BPI are related to the investment (Fig. 12):

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Costs (in million Euros)

Fig. 12

Cost versus realisation of benefits

Project benefits may be masked by external factors

Typical Issues In addition to the quantification of benefits a major problem in benefits management is that benefits often cannot be assigned to a dedicated project and may be masked by external factors. These can be positively reinforced effects but can also be events such as the financial crisis, a possible counterpoint to optimal implementation. Such effects should be taken into account in assessing the performance of the project. For this reason project management cannot be solely responsible for the success of a project: success should be integrated into the incentive system for those responsible. In most cases there is no retroactive connection between the goals in portfolio management and the incentive system for managers. Next Steps and Best Practices The effect on benefits by external factors can be mitigated by tracking benefits against the factors that definitely can be linked to the project. For example, in an online portal this could mean shortening click tracks or adding improved search methods. For a call centre this could be reducing the average response time to a service request. It becomes difficulty to manage these effects against benefits when attempts are made to drive an increase in revenue through these factors. Project interdependencies can be managed by a matrix that identifies project interactions, dependencies and synergies. This matrix can then be used to support the relevant committees as a basis for sound, informed decision-making (Fig. 13).

Benefit achievement should be integrated into the incentive system.

Benefits should be tracked against factors that can be linked to the project

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Number of full time equivalents

Achieve more with less! The status of project portfolio management in IT

Objectives Identification of all dependencies (synergies, conflicts and urgent processes) Identification of key projects with synergies and guarantee thier completion Development and evaluation of project clusters/programs Assessment of the overall project for synergies

Projects A B C D E F

B +1

C 0 +2

D 0 1 0

E 0 0 +1 0

F +1 0 0 0 2

+1 0 0 0 +1 +2 1 0 0

0 +1 0 Method 0 0

+2 +1 0 1 2

Project B cannot be implemented without project C Project A offers a synergy for B no dependency Project B conflicts with project D Project E is not possible without F

E Strategic benefit low

high C low Financial benefit Variable: Number of synergies Must have Conflict high

Fig. 13

Identification of Dependencies & Synergies

For the creation of a PPM organisation the same rules must apply in the way they are used as the basis for the prioritisation of other projects. The benefits of the PPM organisation must be defined and the achievement of objectives must be monitored by measuring KPIs or through the supervision of recognition events. With consistent use PPM helps to identify organisationwide project dependencies, identify synergies, avoid duplication, represent long-term investment patterns and transparently demonstrate their added value to the current portfolio and its benefits. Especially during times of budget constraints PPM provides investment transparency and therefore facilitates the capacity for quick action by management. Projects with no or little benefit can be identified early on and if not required by law or strategically necessary, appropriately blocked.

The rigour that PPM imposes on the selection and management of projects must also apply to the introduction of PPM itself.

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PPM process: is there a standard? PPM process: is there a standard?

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D PPM process: is there a standard?


An interesting finding of our study is that there is no established standard in the field of portfolio management. Whereas more than three quarters of the participants in the field of project management have set up standards such as PMBOOK or PRINCE2, comparable standards of the Project Management Institute or ValiIT played no role. Only three participants had established PPM processes compliant to a specified standard. The following process components with the objective of strategic planning were identified in the study population (Fig. 14): There is no established standard process for PPM.

Identify strategic priorities

Set goals

Consolidate portfolio

Goals

Results

Monitor progress

Measure results

Fig. 14

PPM process components

Portfolio initialisation starts with the identification of strategic priorities for the Portfolio initialisation: the composition forthcoming reporting period. The areas for action are derived from the of the portfolio is derived from the business strategy and the optimal strategic orientation of the individual strategy. projects determined. The next stage sets the goals for the project portfolio: KPIs are defined with appropriate targets and assigned to the strategic goals/priorities. The consolidation of the portfolio completes the portfolio initialisation. Here the projects of the current fiscal year are identified and through a transparent evaluation process (for example, standardised business cases) validated and prioritised accounting for benefits; business strategy alignment; risk; dependencies; and the limiting factors of budget, resources and time. Based on this prioritisation it is then possible to create different scenarios (for example, "continue operations", "enhance innovation", "maximise cost reduction") and finally the definitive portfolio can be adopted. Ongoing monitoring of the portfolio is secured by the development of a PPMO whose tasks include monitoring progress, assisting in the identification of new projects and related project re-prioritisation, upgrade scenarios and management of the entire project portfolio. Measuring the results ensures rigorous control of benefit realisation so that the realisation of planned objectives can be reviewed and evaluated. Portfolio management is not a one-off activity but an ongoing process.

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Achieve more with less! The status of project portfolio management in IT

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Achieve more with less! The status of project portfolio management in IT

E Tools: Enhancing the effectiveness of PPM


A discussion on project portfolio management automatically leads to the question of what tools are needed to support the PPM process. Our interviews have shown that PPM does not necessarily require the use of specialist tools: with appropriate templates and methods PPM can be implemented using the standard suite of office products. If the underlying processes are standardised portfolio management tools can increase the efficiency of processes and above all improve the quality of data used as a basis for decision-making. Additionally, the combined use of PPM and workflow technology tools provides valuable assistance through the automation of processes; simplification in the preparation of status reports or scorecards; and enabling the evaluation of dependencies, especially for large and complex project environments. They allow quick access to current project data and metrics arming management with the capacity to respond rapidly. When selecting a suitable tool, care should be taken to ensure that it fits with the existing system landscape. Many PPM solutions offer sophisticated and extensive functionality so it is often necessary to create interfaces to existing applications to access existing data and to avoid redundant data maintenance (such as controlling applications, Enterprise Architecture Management, Resource Management). An important consideration when selecting PPM tools is that in addition to the operational processes, management reporting is of key importance. Due to individual organisation reporting requirements the necessary integration into existing management dashboards and the need for flexible reporting, we recommend the use of additional software to generate reports. PPM solutions must be integrated into the existing system landscape Tools are not a must, but if used correctly can significantly increase the effectiveness of PPM.

We recommend flexible reporting solutions.

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Achieve more with less! The status of project portfolio management in IT

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Achieve more with less! The status of project portfolio management in IT

F Outlook: what is on the agenda?


Strategic planning is gaining importance A study that PwC conducted last year with the market research firm The Economist Intelligence Unit (EIU) reveals that CXOs expect IT to play an increasing role in the future as a partner for strategic investments (Fig. 14). With the transformation of IT to Business-IT, the CIO has become the innovator driving the business model.
100% 80% 60% 41% 40% 57% 20% 0% 2008
Role of IT: Partner for strategic innovations Role of IT: efficient operating model and cost reduction Role of IT: technical support

IT is increasingly gaining importance as a strategic partner to the business.

9% 32% 34%

27% 2013

Source: The digital company 2013: Freedom to collaborate, the economist Iintelligence unit, September 2008

Fig. 15

The evolution of IT as a partner for strategic innovation

IT 2013: a new role requires new methods According to the EIU forecast, business and IT strategy will be closely By 2013, IT and business will be more interlinked by 2013 and IT will be a key enabler when implementing closely integrated. corporate strategy. Competition-critical IT services will be managed in-house and commodity services purchased on the open market. IT management processes will be focused on innovation; performance and risk management will be integrated into business processes. Employees in IT will possess strong skills in both business and change management, and an agile technology platform will create opportunities for new business models and innovations. The transformation of IT to Business-IT also requires a new approach to project portfolio management. We asked our survey participants what their main focus areas in PPM will be and discovered four common themes: Benefit evaluation and control Integration of project portfolio management and Enterprise Architecture Extension of Financial Business Case Resource Management

Enterprise Project Portfolio Management (EPPM) - myth or reality? The trend towards the introduction of enterprise project portfolio Organisational boundaries complicate management has been predicted by IT professionals and leading technology enterprise project portfolio analysts for some time. This is reflected in the software landscape for project management. portfolio management tools where enterprise project portfolio management solutions are currently a hot topic with many vendors. The application of project portfolio management methods to the entire organisation should lead to
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Achieve more with less! The status of project portfolio management in IT

further potential for optimisation and synergies, and to secure optimal use of resources throughout the organisation. However, our study shows that many organisations still have a long way to go. While in some cases project portfolio management methods from IT have been successfully transferred to other business units, an enterprise-wide implementation has not taken place in any of the organisations surveyed. According to some study participants, one major reason for this is that organisational headaches such as responsibilities and budget limitations are only overcome with great difficulty. Moreover, there is often no central authority that coordinates the enterprise project portfolio management function. Organisations should take up the challenge to create the necessary organisational foundation for enterprise-wide project portfolio management so that they can reap the benefits that continue to be achieved in small pockets throughout their businesses.

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About us
PricewaterhouseCoopers The firms of the PricewaterhouseCoopers global network (www.pwc.com) provide industry-focused assurance, tax and advisory services to build public trust and enhance value for clients and their stakeholders. More than 154,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,200 partners and staff in offices across the country. Information Technology We help implement solutions across the business continuum; IT Management IT Sourcing Business Systems Integration (IT Strategy & Architecture, Applications, Information Management) IT Security & Risk IT Due Dilligence & Post-Merger Integration / Separation

We sit alongside the client and act as overall business integrators, so we combine technology skills with industry knowledge and the capability PwC is famous for in strategy, finance, risk, operations and HR issues, to deliver whats needed and make sure that we embed practical and sustainable change.

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Contacts
Marcus Messerschmidt Consulting Moskauer Strae 19 40227 Dsseldorf Tel.: +49 211 981-4872 marcus.messerschmidt@de.pwc.com Philipp Emslander Consulting Moskauer Strae 19 40227 Dsseldorf Tel.: +49 211 981-2537 philipp.emslander@de.pwc.com

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Mit weniger mehr erreichen! Studie zum Stand des Projekt-Portfolio-Managements in der IT

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