Information technology is generally the wildcard in any company's annual budget. Unpredictable in cost and difficult to explain to the layman, IT is one cost center that can be relied upon to keep executives up at night.Given that upper-level executives are not generally also computer experts, methods for riding herd on IT projects had to be devised.
Failure to do so in the past has resulted in expensive and ineffective solutions, redundancies, and missed opportunities to combine strengths and cut losses by managing resources more effectively.
According to a study conducted by Business Engine, San Francisco, "large organizations fail to capture an aggregate of nearly $300 million per year in IT cost savings." The same study notes that financial service technology groups spend twice as much on projects as technology groups in other verticals.
One of the most popular approaches to taming IT costs and achieving higher efficiencies is IT project portfolio management (IT/PPM).
Project portfolio management, which was advanced by a University of Chicago economist in the 1950s, is a given in the financial world.
Its application as a way of managing IT resources has gained popularity only in the last few years-as budgets have tightened and companies have sought ways to make the IT function more cost-effective.
In essence, IT/PPM looks at IT outlay and assets as investments to be used to maximum efficiency and profitability. This entails a detailed overview of projects from the top and a more centralized approach to decision-making, necessitating a new level of cooperation throughout the enterprise.
Blaise Beaulieur, assistant director for corporate planning at Milwaukee-based Northwestern Mutual Life Insurance Co., describes his company's approach to IT portfolio management as an overarching process that controls "how we prioritize and select our projects, how we monitor and adjust them and our overall portfolio of investments for projects. The total cost for a project is encapsulated into the estimate or project that we manage underneath our overall portfolio."
Just about the software?
A quick perusal of the Internet reveals dozens of companies offering IT portfolio management software, each promising an effective and easy-to-understand way of organizing information so as to best position the busy executive to make those crucial IT decisions.
A study by New York-based IT portfolio management software and services company UMT states: "More than 50% of Global 2000 companies [were] expected to adopt portfolio management by 2004."
An increased ability to oversee project operations, the ability to combine resources to share and reuse information and products, and the ability to project future results are among portfolio management's purported benefits.
But the benefits of this approach go beyond features of the software.
For example, the philosophy behind IT/PPM is comprehensiveness. Discipline in allocation of resources based on agreed-upon metrics should determine outlay, which defeats the "squeaky wheel" phenomenon in which the projects that draw the most attention receive the most resources.
"There is always significant demand for projects," admits Beaulieur. For that, Mike Gruia, president of UMT, says organizations "require a certain discipline and a certain governance" to make IT/PPM solutions work.
"If a company is not organized, people with political power within the organization get their projects approved not because of their value but because of who they are," says Gruia. To achieve success, he says, "The political infighting has to stop."
Despite the possibilities for infighting, Northwestern Mutual has had a largely positive experience, according to Beaulieur.
"We've adopted a very enterprisewide view of our portfolio investments. We have a cross-functional group of representatives that prioritizes the projects. Rather than take the siloed view, we look holistically across the organization."
Still, Beaulieur admits to the exigent nature of the process.
"It's challenging when you've got a life insurance line and an annuity line and the product departments are all trying to get something done to improve their bottom line. But the departments are involved in the decision so they have a tendency to understand the process," he says.
Indeed, the process of putting all an organization's resources on the table to achieve agreed-upon long-term strategic and tactical aims is not an easy or painless task.
The first question many ask at the primary presentation is: "Why do we want to bother with this?," says Gruia, who admits there are many obstacles to implementing such a far-reaching solution.
Beaulieur describes IT/PPM implementation and management as a journey.
"It's not an end that you typically ever get to." Aside from ordinary resistance to change, IT/PPM requires new lines of communication between departments-and, more important, a new way of defining value within the organization. This can be threatening to some who find their methods or place within an organization under scrutiny with new rules of the game.
Ear to the ground
Yet IT/PPM is, in concept, egalitarian, providing opportunities for those with sound ideas but no standing to advance them. By passing traditional hierarchies in favor of centralized, rationalized decision-making, IT/PPM puts an "ear to the ground" for innovations and cost-saving techniques that might have been ignored or undervalued under a more top-down approach.
"A good deal of innovation needs to come from the bottom up," says Gruia, describing his company's approach.
Asked if IT/PPM has generated any cost-saving synergies for his company, Beaulieur says, "Abso-lutely-especially in the area of technology. It allows us to see where an infrastructure component might be developed for one project, and, if we see that multiple projects are requesting funding for a similar solution, we can fund one and coordinate the sharing of that resource with the others."
Old habits die hard, though. The temptation to view portfolio management as simply another way of grouping the same set of projects and priorities-rather than as a dynamic process that ties metrics with overall long-term strategy-is ever present. Making it worse is the pressure to demonstrate a positive ROI as quickly as possible.
That, says Gruia, is a mistake.
The system and its implementation must be embraced by the entire organization and given time to prove its worth, he says. "The readiness of a given organization to adopt this type of systemic approach depends on the maturity of the organization," Gruia says. "How ready are they to change?"
Maturity is something Beaulieur also mentions as a goal.
"There's always that challenge of trying to refine it on a year-to-year basis, to find those things that are going to bring us to a different level of maturity," he says.
The most successful organizations take the time to fully implement the solution and involve the entire human component, says Gruia. Less successful are those that indoctrinate only a selected group. This approach achieves showy results early on, but eventually, the company's PPM/IT initiative disappears, he says.
In the end, is IT project portfolio management the answer to everybody's problems? The answer lies in the individual organization's commitment to the system and the personnel-from the executives to the people in the field-to make it work.
A company already doing the right things in terms of governance, planning, budgeting and fostering communications between disparate departments would seem to have the best shot at successful implementation of IT/PPM, according to sources. Where systemic problems exist, even a comprehensive solution such as portfolio management will have trouble taking root.
