Portfolio Management for Effective Resource and Project Planning – Pt. 4
This is Part 4 of a series on Portfolio Management from Nancy Ingalls at Ingalls Consulting. You can go back to start reading this series from Part 1.
We’ll continue our discussion to address this question: How does Information Technology Portfolio Management affect asset and project planning?
The main components to Portfolio Management are the Discovery Portfolio, Project Portfolio and Asset Portfolio. The Discovery Portfolio captures opportunities, ideas and concepts. Contained in the Project Portfolio are proposed and approved projects that expand, replace or correct information technology solutions. Asset Portfolio items are a compilation of people, applications, information, and processes. This series will investigate the changes required to Project Management and Asset Management for the implementation of a portfolio. With the hundreds of billions of dollars in information technology spending each year, the importance of the problem cannot be understated. Many companies do not have the processes in place for tracking current investments or validating expected results. A continual stream of information on projects and resources to evaluate and adjust investments is needed to best manage the portfolio.
Project Portfolio
Enacting checks and balances into the Project Portfolio can improve the work in process state of the portfolio. Variances in the project process will become visible at a much higher level. The issues that can be brought to light include incomplete requirements, poor estimating techniques and over allocated resources. All stakeholders, executive sponsors, program managers and project managers must have visibility to the status of projects underway in order to make adjustments and adapt to changing business requirements. One of the most difficult cultural changes for most companies is the willingness to kill projects. It is good practice to cancel poorly performing projects or projects that need to give up resources for a new initiative with a higher business priority. The Project Portfolio Organizational Flow below represents the relationships between project management with the business using processes and tools for checks and balances. Organizations require a “dynamic measurement mechanism” to properly evaluate and adjust the consumption of resources against the goals and priorities of the business.
Project Portfolio Organizational Flow
In a survey of 250 customers provided, approximately 12 percent of projects are “broken in some way, shape or form.” This is significantly lower than industry statistics that report the number at approximately 70%. Of the 12 % of problem projects, the survey despondence reported a 55% recovery rate when the problems were recognized early in the project. The key to improved project management results is accurate cost and time data. The survey also revealed a 6.5% cost reduction from improvements in tracking time alone.
Asset Portfolio
Asset portfolios primary goal is to provide visibility of the health of the resources of the company. This is important to managing and assessing the health for future planning. The following attributes are key in the evaluation of business value for applications:
- Importance of the system to the business unit
- Investment in the system
- Technical quality of the system
- Level of use of the system
- Perceived management value of the system
Measuring the importance of a system can be difficult and subjective. The more closely aligned with the business goals and objectives, the more apt the system is to be perceived as important. Personal judgments from the business customer are critical inputs to the decision make process. Development of a systematic approach can be challenging.
A high level evaluation of applications can be performed with the business value and technical condition. Applications in the lower left quadrant are candidates for replacement, consolidation or elimination. This grouping is a collection of applications that are of poor technical quality and low business value. Applications in the lower right quadrant are candidates for reengineering or modernizing. This group is worth additional investment due to the business value provided. The upper left quadrant contains applications of high technical quality with low business value. This group should be looked at for repositioning. The upper right hand quadrant is the desired location to transition to for the majority of the applications. This does not imply that once an application moves to this quadrant there is no need to evolve and maintain. The following picture depicts a three year progressive migration from a typical technical condition to a business focused, technical savvy company.
Three Year Progressive Migration
Benefits from Portfolio Management will come from a number of areas. The main goal of the portfolio management effort is to increase visibility of the information technology value to the business customer. The initial effort will focus on business case development with the customer. This information will be consolidated into an enterprise application for portfolio management.
The first steps in moving to in this new direction is to evaluate where each sector in the organization stands currently with their existing process. The following questions were asked to a group from each sector to gage the maturity level:
- Describe the level of Governance currently in place at this sector?
- Do you have a governance effort under way?
- Does your organization use the standard business case development process? And to what extent?
- Does your organization capture projects that don’t make the cut at budget time? Are these projects saved for evaluation later?
- Does your organization us the standard Project Management Methodology? To what level?
- What metrics do you capture about the projects?
- Does your organization perform monthly Project Management Reviews?
- What tools are used for Resource Management? How effective are the tools with planning and adjusting throughout the year?
- How credible is your asset inventory information and groupings?
- Are there any issues that would need to be address prior to implementation of a Portfolio Management Tool?
- Are there any additional things that we should know about differences in your organization from the other sectors?
During the interviews, the participants were encouraged to speak freely about the true state of the process and information at the sector. The resulting maturity evaluations are enumerated and represented by bar chart. As demonstrated by the maturity ratings, most of the sectors are at the equivalent stages of development. In a few of the categories, pilot efforts into more advanced applications have advanced the sector to a higher rating. Conversely, some sectors have not yet adapted to the existing standards set forth by the enterprise. These late adaptors will lag behind the others.
Maturity Evaluations Bar Chart
The evaluation criteria developed by the software vendor considers the following levels: 1 – Informal, 2 – Defined, 3 – Managed, 4 – Measured and 5 – Optimized. The resulting maturity evaluations are enumerated and represented by bar chart. As demonstrated by the maturity ratings, a similar pattern showing that the sectors are at the equivalent stages of development. The comparison for the more advanced sectors and late adaptors also applies to this evaluation scheme.
The maturity evaluation for the sectors demonstrated a need for Portfolio Management. Each group recognized that in some areas of the portfolio, an improved service to the business customer could be achieved. Only a few members of the interview group were completely apposed to the idea of implementing an Information Technology Portfolio.
The Discovery Portfolio concepts were well received by all sectors. The collection of proposal information into a central repository was an idea of universal consensus. As part of the Information Technology Portfolio Management Pilot, this information was collected and entered into a software application. A notable issue in this area was that the information was not readily available, updated with the most recent data, and in some cases, incomplete. With the visibility of a central repository for business cases, it is improbable that this would go un-noticed.
The Project Portfolio concepts met with some resistance. Three of the eight sector representative saw no need for project or resource metrics in the portfolio. The remaining five sector representatives recognized a need for improved project visibility and human resource optimization. A representative stated that “getting resources is like pulling teeth, never enough.” Another representative added that “projects get off to a rough start due to resource issues.” This sector also experiences difficulties responding quickly to shifting priorities. Resource management is facilitated using manually updated Excel spreadsheets. This method is labor intensive and not reflective of the current project status for each resource. Resources that will not be released from a prior project in time to begin the next are frequently undiscovered until it is too late to make adjustments. Shifting resources due to changing project priorities is also an issue creating delays in project initiations. At the other end of the spectrum, the CIO of another sector states that, “IT Resource Management on a large scale does not work. The value does not justify the cost.” This particular sector has a low percentage of non-recurring spending.
The Asset Portfolio was of great interest to the group. One sector performed a pilot of an Asset Portfolio. The pilot information was extracted from existing software packages for application inventories, maintenance, and accounting. In joining the information, it was discovered that inconsistent application labeling created a high level of complexity in the calculation of total cost of ownership. This will be an issue for all of the sectors in implementing the portfolio. The long term solution will involve changes in the source systems to create common data elements for analysis. For the pilot, only a high level analysis was developed based on the granularity of available data.
The Information Technology Portfolio Management implementation will require changes to the way projects, resources and assets are measured and evaluated. Each sector will evolve through the maturity models at different rates based on the areas of priority to the business counterpart. Sectors with a large percentage of non-recurring project work will focus on the Project Portfolio. Sectors with a majority of recurring systems expense will focus on the Asset Portfolio. Change management and communications will be an import part of the implementation regardless of the maturity level.
Join us for Part 5 of this series which will conclude this study of Portfolio Management.
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