White Paper

Projects Are Investments

Project Portfolio Management (PPM) Is Not Just About Projects
When IT projects are completed and systems are delivered, they dont just disappear. These completed projects can be described in various ways: investments, assets, operational applications, etc. For purposes of this article, we will call them investments. Whatever they are called, they typically require a continuing investment of resource time, effort, and dollars to maintain, fix, and upgrade. Managing the post-project delivery lifecycle effort is critical to an IT organization. Summary points: Investments Have a Value-Benefit Lifecycle As IT projects transition into operational systems, they continue to require time and energy to become value-contributing assets, or investments. But not all investments are of equivalent value. Some investments are still rising up the front end of the value-creation curve and some are in decline. This creates a three-way split for resource allocation between new projects, investments on the rise, and investments in steady state or decline. As usual, in a PPM framework, the question becomes: How do we best allocate our available resources in this environment? Resource Management Not Just For Projects To properly understand what an organizations resource capacity is, the amount of time resources spend on investment activities should be forecasted and captured just as it is for projects. Otherwise, organizations assume supply exists which is truly not available. It is critical for an organization to understand and prioritize where its resources are spending time. Measure ROI To Get the Complete Picture Companies rarely go back to evaluate how their investments benefits are performing against the original forecasted benefits when they were approved as projects. Most organizations are not tracking the ongoing costs that were forecasted to maintain the project once its completed. The merit of these investments and their contribution to organizational goals should be scrutinized in the same manner as in-progress projects and proposals. Otherwise, the organization is spending unaccounted-for money.

V1.0 Copyright 2006, Innotas

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Projects Are Investments

IT executives and leaders are quickly realizing that PPM is essential for their survival. Being able to understand in real time the health of project initiatives, the upcoming work being requested, and where resources are being utilized is of paramount importance to any IT organization. This is what is driving the rising demand for PPM solutions in the mid-market. But PPM is about more than just projects its about the effective deployment of available resources across the board. For a total picture of portfolio performance leaders must account for all activities, not just projects. Analysts, vendors, and solution-hunting customers in this market have all struggled to account for the part of the business that usually accounts for nearly 80% of the annual IT spend; the non-project related activities such as key systems support, critical infrastructure, and core business processes. In order for CIOs to make informed decisions, they need to see the entire picture. These investments typically have fairly predictable activities:

For years, the goal in IT has been to reduce operational spend in order to increase strategic spend. Take the 70/30 current split and turn it upside down to make it 30/70. In other words, the discussion has centered around creating new sources of value through projects rather than just spending time keeping the lights on. That may make a good sound bite but does is make successful IT departments? There are certain keep the lights on (KTLO) items that will continue to exist and will likely almost always consume more budget than project centric initiatives.

Error tracking and debugging Break/Fix Version enhancements Version upgrades Comprehensive user support Technical troubleshooting Performance monitoring Performance testing Quality assurance testing Documentation development and maintenance

Source: Gartner

Investments Have a Value-Benefit Lifecycle As IT projects transition into operational systems, they continue to require time and energy to become value-contributing assets, or investments. But not all investments are of equivalent value. How many projects realize their forecasted return the day after they are completed? The answer is usually zero.

V1.0 Copyright 2006, Innotas

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Projects Are Investments

Investments have lifecycles just as projects do. Investments need to be tweaked, tuned and cared for after their project or implementation phase is completed. The learning curve can be steep. They dont typically run to maximum efficiency immediately after go-live. Some Investments may take 6 or 12 months to reach their intended run rate and forecasted return. This ramp up period is a critical time to ensure that the original project reaches its intended results. In many cases, there are many more benefits in the new systems than were originally intended, which is also a part of the ongoing investment. to provide value to the company. Their success is every bit as important as todays proposals because they represent where money has already been spent. To simplify, the investment is a series of extended phases of the original project and should be managed with the appropriate level of scrutiny. Resource Management - Not Just For Projects Effective resource allocation is not just about balancing supply and demand. Its about allocating the right resources to the right work items. Often people are not assigned to projects that align with their skill and experience levels. Resources need to be allocated where they have an opportunity to succeed and therefore provide the most return for the organization. In the mid-market, skilled IT resources are not usually in abundance. People are working on multiple tasks and spread across numerous efforts and initiatives. The same person could be working simultaneously on a large project, a small enhancement request, and performing normal day to day maintenance and support activities for one of the organizations production applications. Measuring ROI To Get the Complete Picture A project may have finished on time and on budget, but if it doesnt produce the intended results, was it really a wise investment of company resources and capital? In some organizations, the amount of money spent on projects is tracked in excruciating detail - EVA, EVM, CPI, SPI. Everyone in the organization claims to focus on how a project is performing in terms of cost and schedule and resources as compared to the budget. When,

Value Benefit Realization

Expected Return Realized

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Investment Timeline

After stabilization at the desired operating level, an investment should theoretically operate as planned. Investments are eventually closed and are replaced by improved solutions which begin their lifecycle as new proposals. Investments are also too quickly dumped into the tactical bucket. These investments, many of them substantial, arent always KTLO and they arent all regulatory must-dos. There are items that fit these designations, but to lump all investments in this category is a very general, very inaccurate designation. These investments were mission critical projects a short time ago, and were executed because they were deemed

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Projects Are Investments

in reality, it is often just a shell game to say that projects are under control by one of the mentioned tracking methods until the alarms go off on overspend or late delivery. Then problems cause four alarm fire drills and Heads will roll! proclamations from on high. A big part of understanding the ongoing costs expended on, and value provided by, investments has to do with communication with resources in the field .... the resources actually working on and supporting investments. Only after understanding what they are doing to keep these investments operating can management begin to analyze how the investments are contributing to the overall portfolio. More importantly organizations can analyze the return on their investments and answer: Are we allocating our valued resources to the right work items? Is the organization meeting the ROI expected from its investments? Are investments consuming more resources than forecasted? Are the investments still aligned with organizational goals and providing sufficient return to justify their continued funding? These questions should not just be asked by IT to IT, they should be discussed with ITs business counterparts. Jointly they should ask questions like: Should we sunset an application? Is it time to upgrade our solution to something better? Can we spend less to get the same results? Do we need to spend more in certain areas? Does increasing support for an investment take precedence over some new proposed projects? Managers should ask the same kinds of questions when deciding to continue to spend money as when initially deciding to spend money. Side Note Accountability In regards to the decision on where to spend money, there is also an accountability factor at play. Proposals were originally approved because they represented some perceived value to the organization, whether it is revenue generating, competitive advantage, regulatory compliance, etc. Once those proposals become active projects and were completed, they need someone to support and own them. The CIO ultimately becomes responsible for maintaining and supporting investments. These are real costs and require real budget. When the CIOs customer organizations come to IT with additional requirements and demands, the CIO must have access to data that the entire organization can use to objectively measure the performance of their portfolio and account for that performance when making future investment decisions. Summary To not account for the operational part of the business is to leave out the majority of the time and money spent in todays IT world. To not account for the operational part of the business is to not truly perform PPM. A true PPM solution needs to support and report on the entire picture: proposed projects, active projects AND investments.

V1.0 Copyright 2006, Innotas

www.innotas.com