This round of research is based on the more than 5, projects that were in the database as of June We also found that the longer a project is scheduled to last, the more likely it is that it will run over time and budget, with every additional year spent on the project increasing cost overruns by 15 percent. Staggering as these findings are, most companies survive the pain of cost and schedule overruns.
However, 17 percent of IT projects go so bad that they can threaten the very existence of the company. Large IT projects that turn into black swans are defined as those with budget overruns of more than percent and up to percent at the extreme end of the spectrum. Such overruns match or surpass those experienced by black swans among complex construction projects such as tunnels and bridges.
When that effort failed, too, the retailer had to file for bankruptcy.
So how do companies maximize the chances that their IT projects deliver the expected value on time and within budget? According to survey responses, an inability to master the first two dimensions typically causes about half of all cost overruns, while poor performance on the second two dimensions accounts for an additional 40 percent of overspending Exhibit 2.
IT initiatives too often pay little heed to strategy and stakeholders and manage projects purely according to budget and schedule targets.
This led to several complex changes in the accounting modules as a result of a recently introduced performance-management system. By building a robust business case and maintaining focus on business objectives along the whole project timeline, successful teams can avoid cost overruns. They can also, for example, ensure faster customer response times, obtain higher-quality data for the marketing organization, or reduce the number of required manual processes. High-performing project teams also improve the ways in which a company manages its internal and external stakeholders, such as business and IT executives, vendors, partners, and regulators.
Project leaders continually engage with all business unit and functional heads to ensure genuine alignment between business needs and the IT solutions being developed. Good stakeholder management involves foresight when it comes to selecting vendors and negotiating contracts with them. Some companies have learned this the hard way. A bank in the Middle East negotiated hard for price with a vendor and later suffered at the hands of an inexperienced vendor team.
Delivering large-scale IT projects on time, on budget, and on value
Another bank scored well on unit price with a software-package provider for the project phase of a trading-system implementation but encountered high costs for changes and support after the system was introduced and the bank was locked into the new technology. Drawing on expert help as needed, high-performing teams orchestrate all technical aspects of the project, including IT architecture and infrastructure, functionality trade-offs, quality assurance, migration and rollout plans, and project scope.
The right team will understand both business and technical concerns, which is why companies must assign a few high-performing and experienced experts for the length of the program.
We estimate that the appropriate experts can raise performance by as much as percent through their judgment and ability to interpret data patterns. One common pitfall occurs when teams focus disproportionately on technology issues and targets. A bank wanted to create a central data warehouse to overcome inconsistencies that occurred among its business-unit finance data, centralized finance data, and risk data.
However, the project team focused purely on developing the IT-architecture solution for the data warehouse instead of addressing the end goal, which was to handle information inconsistencies. This added huge amounts of unnecessary complexity. To eliminate waste and to focus on the items that represented the greatest business value, the team introduced lean 3 3.
At the same time, it established rigorous testing and rollout plans to ensure quality and introduced clearly defined stage gates. Through these and other actions, the team was able to check 95 percent of all test cases, fix critical defects, and verify the fixes before continuing from the unit test phase to integration testing.
Large projects can take on a life of their own in an organization.
To be effective and efficient, project teams need a common vision, shared team processes, and a high-performance culture. To build a solid team, members should have a common incentive structure that is aligned with the overall project goal, in contrast with individual work-stream goals. A business-to-technology team that is financially aligned with the value-delivery targets will also ensure that all the critical change-management steps are taken and that, for example, communications with the rest of the organization are clear, timely, and precise.
To ensure the smooth start-up of new front-end and core systems that more than 8, people would use, one company team launched a massive—and successful—change-management program. The program included a regular newsletter, desktop calendars that highlighted key changes and milestones, and quarterly town-hall meetings with the CEO.
The team made sure all top business-unit leaders were involved during the user-acceptance phase. The company included at least one change agent on each team. These agents received training that instilled a clear understanding of the benefits of the IT change.
The actions helped the company to verify that it had the required business capabilities in place to make full use of the technology being implemented and that it could deliver the business value expected in the overall project business case. These include having a strategic and disciplined project-management office and establishing rigorous processes for managing requirements engineering and change requests. The project office should establish a few strong stage gates to ensure high-quality end products. At the same time, it needs to strive for a short delivery life cycle to avoid creating waste in the development process.
Another organization, a high-tech company, established clear quality criteria for a project master plan, which mandated that teams break down all activities so that they required fewer than 20 person-days to complete and took no longer than four weeks. The waterfall model is a sequential software-development process in which progress is seen as flowing steadily downward—like a waterfall—through the phases of conception, initiation, analysis, design, construction, testing, and maintenance.
The longer you rely on outdated or irrelevant information, the further hidden are your core projects. Typically, project portfolio management strategies follow both a top-down and bottom-up tactical approach, giving you unlimited visibility into past and current project metrics. So one key measurement metric is resource overview. When your resources are taken off unprofitable activities, their utilization rates and productivity increase in line with increased billability.
An effective project portfolio management strategy lends weight to your decisions by generating resource data in real-time, prepping you to address every project-centric activity. Traversing the project portfolio gives you project history that reflects the symbiotic relationship between people and projects. Informed decision-making forces managers to draw findings based on enterprise-wide benefits rather than personal interest, contributing to overall portfolio success.
The word risk has a strong negative ring to it, but it simply happens to be inevitable at times. Risks have financial and program implications, meaning that minimizing them prevents you from miscalculating gross efforts required for upcoming and current projects. Project revisions stretch your budget and delay both your resources and project delivery.
The PPM strategy detects budget deviations between planned and actual work, helping you avoid financial risks before a project commences. It contains standardized project management methods and processes centred around a dependable framework. The estimation tools sitting within PPM routinely analyze costs versus benefits, helping your Project Management Office identify wayward projects. PPM alerts you to overexposure on non-viable efforts by indicating potential budget overruns, schedule delays and technical inadequacies. It prevents these risks from carrying through to project delivery, thus leaving you with high-value,low-risk projects.
PPM mobilizes your resources to invest their best and maximum efforts onto the most feasible ventures. Simply put, this means duplicate efforts are not wasted on activities with no monetary benefits to show for it. The degree of visibility mentioned earlier helps you assess the need and demand for different skills. You can exercise control over resource utilization and allocate an optimal workload to each resource.
With resourcing costs being a substantial spend, you can reduce both bench-time and overhead by removing surplus and unnecessary skills. Optimal resource allocation gives your organization the ability to make the best use of available resources by deploying them on to the highest priority projects. A comprehensive overview of utilization rates and availability lets you arrive at resource-centric conclusions in a managerial capacity.
It scans capacity and redistributes talent in scientifically measured proportions across several projects. Forecasting projected demand to this resource capacity let you spread your resources out on valuable projects without over or underwhelming them. Effective portfolio management collects information from those project initiatives that performed well in the past and successfully delivered business value.
How to Deliver More Business Benefits From IT Investments | The European Financial Review
It explores the probability of similar projects flowing in the pipeline, preparing your resources to obtain the appropriate briefing and training beforehand. PPM integrates project planning, financial and resource data across the portfolio, ensuring that projects are separated from daily operational activities. Perception of value differs from user to user. An established PMO compares the perceptual value against the actual value to prove its worth to stakeholders with a vested interest in individual projects within the portfolio.
An effective PPM strategy makes use of tracking tools to survey project health. Tracking tools measure financial aspects like the Return on Investment.