Maximize ROI With a Project Office

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February 17, 2003 (Computerworld) -- According to The Standish Group International Inc. in West Yarmouth, Mass., schedule delays on IT projects still occur 63% of the time, while 45% of companies face cost overruns. Overall, 23% of all projects fail, which means the project is canceled before completion or is never implemented. Furthermore, 49% of projects are challenged, meaning that the project is completed but is over budget, exceeds the time estimate or boasts fewer features and functions than initially specified.
Many of the companies with successful IT projects use effective project management techniques. Of these, the concept of a project office is becoming ever more important as business issues and limited resources are increasing the pressure to achieve a measurable return on investment.
How a Project Office Works
A project office is a corporate management organization that evaluates, measures and essentially enforces the performance and interaction of the implementation of IT project processes across a company's business units. It determines the key players for each project and their roles as well as who is responsible for communicating and setting policy regarding the project's performance.
It's also responsible for building consensus and communicating to the heads of the business units involved, as well as senior management, about the project's performance. The project management office must be on-site, because close proximity to the company's business units, senior management and IT teams across the enterprise is critical to streamlining information-gathering and reporting.
Members of the Project Office
A variety of management-level people representing both the business and the technology arenas should serve in the project office.

• A project specialist: This is a person with project management skills who can provide training and mentoring to those charged with delivering the projects.


• A project analyst: This person's responsibility is to gather, compile and report information on the project's performance to senior management. In addition, the project's performance is measured in relation to other IT projects being implemented throughout the enterprise, because there are often underlying interdependencies among IT projects. The implementation of one project is often contingent on the components of another.

Staffing project management offices should be determined by the skill sets and competencies of the company's own IT staff. However, as employees come and go, and the requirements of IT projects often change, a company may not always have the appropriate people with the needed skills on staff at all times. Given that, using outside resources can be an effective alternative, at least at certain points in a company's timeline.
Why Implement a Project Office?
The implementation of IT projects across the enterprise requires a certain level of coordination. It's important for businesses to adopt a macro perspective of their IT projects to better understand, for example, why and when certain resources may or may not be available to them during the implementation or when corporate resources may need to be shared to avoid unnecessary overhiring.
Not only will the project management office determine whether the intended project is in line with the company's overall business strategy and objectives, it can also assess issues such as internal capabilities and resources, activities to be outsourced or handled in-house, and actual vs. projected ROI.
Specifically, a project office will work to:

• Eliminate project redundancies. The implementation of similar IT systems within a single organization often leads to implementation of dissimilar or noncomplementary platforms, making integration of legacy systems with emerging technology all the more difficult. In addition, multiple divisions forgo cost efficiencies if they implement similar technologies concurrently, but separately.


• Standardize the delivery process: A project management office requires adherence to a standardized delivery process. For example, the business units need to present a business justification and demonstrate how the system meets corporate objectives and integrates with other corporate systems. The hidden cost of system integration is the maintenance and upkeep. Costs can be contained if a company is maintaining only one of everything.


• Assess ROI: The original assumptions about the system's performance and profitability need to be tested. By assessing the ROI once the project is completed, the project office will prevent the organization from engaging in future projects that underperform or exceed the original budget.


• Avoid the "latest and greatest" syndrome: Emerging technologies capture corporate attention quickly, but if teams repeatedly introduce new, often more-expensive technology, they can lose the ability to build on existing knowledge, cause unplanned research and development and ultimately make projects more expensive and risky. A project management office may determine that the latest and greatest technology will neither reduce operating costs nor improve profitability.

How Does the Project Office Measure Up?
The big question for many companies trying to improve project management is, "How do we measure ROI?" For example, a large insurance industry data aggregator sought to augment the level of service it provided its member companies by Web-enabling existing client/server applications. The company began to consolidate the disparate systems and reduce overall operating costs related to outsourced development.
It created a project assessment framework, which evaluated the project's contribution to the bottom line, the impact on the firm's existing technology and the resource requirements, including head count and skills.
Then, a project office team was assembled to review all of the company's current IT projects and initiatives to determine whether to continue those projects as planned, based on the new proposed Web-enabled framework. The project office conducted an ROI assessment to determine which projects would proceed. The results were both staggering and impressive:

• The company had launched 80 projects at an average cost of $300,000 each.


• Five of the projects in the pipeline were canceled for failing to meet the appropriate criteria.


• After the ROI assessment, another 36 of the projects never made it into production.

Six people -- three from an outside contractor and three in-house employees -- initially staffed the project office. Once they overcame the influx of new projects and assessments, the staff was reduced to three full-time employees, each with an average salary of $80,000. The company then instituted measures and controls to ensure that the various projects around the company would meet the projected performance and timing goals. Because the project office was recognized by the company's senior management, new projects could be slotted for implementation throughout the year.
I know that a proposed project management function might raise eyebrows about whether its benefits exceed its costs. In this case, the project office had annual operating costs of $253,000, but it saved the company $2.5 million by canceling uneconomic projects in just one year. That demonstrates real value -- both intermediate and longer-term -- to the bottom line.
Elkins is an independent IT project consultant, formerly with Rila Solutions Inc. and Broadreach Consulting Inc. He can be reached at william_elkins@msn.com.

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Maximize ROI With a Project Office

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