Project-portfolio management software is helping Horizon Blue Cross Blue Shield of New Jersey, a $6 billion-plus health-insurance provider, make its move from a not-for-profit to a for-profit health insurer. As part of the effort, several hundred million dollars were allocated to IT over a five-year period to tackle tasks such as consolidating five enterprise software platforms into two, better managing compliance with regulatory offices, and simplifying new-product development.
These IT initiatives involve hundreds of skilled people working on hundreds of concurrently developing projects, and it requires executive-level visibility into each project, any subset of projects, or all existing and planned projects, collectively. A rigorous and formalized project-portfolio management strategy was considered fundamental to success.
Miller planned IT's role in Horizon's transition.
Horizon discovered what many companies are just finding out: It's no longer feasible to simply throw money and resources at projects, particularly complex IT efforts, and hope for the best. That's especially true in less-than-flush economic times. That approach still is too common, though. The Standish Group says more than half of company technology projects will fail or are "challenged." That's bad news in an age when
IT is behind almost every business effort, whether it's a legacy upgrade or a merger-driven integration that's designed to enhance a company's ability to innovate. As Miller says, "We're so information-based, even potential new product offerings become software projects."
Miller began her efforts by having her team review project-management processes and talk extensively with peers and partners (including Merrill Lynch and Deutsche Bank) on how and what to implement as a project-management methodology. "I don't see how you can do a credible product solution without a project-management discipline," Miller says. Ideas also were vetted with internal project managers.
Then Miller's group reviewed tools and templates from 22 vendors on 50 criteria to see which, if any, could support the level of project management to be implemented.
Horizon finally settled on IT portfolio-management software from Business Engine Inc. Data is collected through standardized templates created for Microsoft Project, stored in an enterprise database, then fed into Business Engine's analytical tool, called Ben. There, each user, as permitted, can view and manipulate spreadsheets and graphs, share documents, track revisions, and run what-if scenarios in a personalized dashboard view.
The idea behind offerings such as Business Engine's software is to help companies manage IT projects and assets as if they were investments, tracking their performance against business goals, assessing their individual return and value to the company, and helping sort out which deserve more attention and resources and which can plug along with reduced resources or be put on the back burner, or perhaps even pulled.
Certainly, Horizon is treating its IT project plans with the same scrutiny it gives to other efforts. Horizon's CEO holds quarterly operating review meetings with Miller and CIO Chuck Emery, as well as other direct reports, to analyze the company's 39 largest projects--all of $1 million or more in cost--over the preceding quarter and the next quarter. Reviews by deliverables, dollars spent to date, and function or strategy are made of existing projects. The software yellow or red flags projects that are failing to meet cost or schedule goals. Then, when forward-looking scenarios are input, flags also pop up if there appear to be problems with human resources, budgeted funding, or scheduling.
But the 39 largest projects make up only about 15% of the total numbers in the system. So meetings that echo the format of the CEO's quarterly operating review are held at each of the company's 18 divisions as well as at the project level.
Miller has set up project-approval methods with a similar rationale: Major projects require project definition and project-management discipline documents, net present value, and return-on-investment analysis, while the smallest projects, typically 90-day fast-track efforts, require just a project plan and a budget.
The result: Horizon is ahead of schedule on its legacy-reduction effort, and it has developed repeatable and reportable methodologies with responsibility up and down the company.
Not all business-technology executives have embraced the idea of aligning and managing their projects, resources, and budgets to achieve greater return on their portfolios of investments. Eight out of 10 respondents in a study of 130 senior executives on portfolio management say a lack of financial skills in the IT department makes it difficult to track IT investments' value, according to Northwestern University's Kellogg School of Management and management-consulting firm DiamondCluster International (see "IT Staffs Lack Financial Chops For Project Analysis," March 24, p. 20).
Some of the players in the traditional project-management software market are aiming to help their customers feel more comfortable in the new world of portfolio management. Microsoft dominates the desktop project-management market with Microsoft Project, which has more than 8 million users and about 80% of the market share. Microsoft last year launched Microsoft 2002 Project Server and Project Professional, which together make up the vendor's Solution for Enterprise Project Management. The software, which is XML-ready, aims to be a driver of new, more efficient global strategies, such as just-in-time inventory management, total-quality management, and rapid-application development. It's also a way to stretch the ever-more-constrained IT budget.
Features that can help IT departments manage their own project portfolios include the ability to analyze resource use and availability for multiple projects, perform what-if analysis to see how changes in scope or schedule affect project outcomes, and identify options for addressing at-risk projects by providing models that show the impact of changes to all projects' schedules and resource assignments.
But Microsoft says it doesn't want to barge into niche areas such as vertical-market specialization and financial analysis that are handled by strategic partners and hundreds of value-add vendors--at least not yet. "We're always looking for the 90% [of the market] solution," says Zena Girdler, Microsoft Project's product manager. Still, a strategic partnership Microsoft has with Business Engine permits Microsoft to replace the analytics and financial tools it licenses from Business Engine with Microsoft-developed code.
Nicolas Dubuc, collaborative project manager at Rhodia Inc., a $6 billion-a-year worldwide manufacturer of specialty chemicals, is using Microsoft's software to develop project-management templates and methodologies that can be adopted by any or all of Rhodia's 18 divisions. "We're designing a platform for rapid product development that will enhance opportunities for innovation," he says.
Dubuc gets his direction from Rhodia.com, a committee consisting of the CIO, select IT staffers, research and development teams, and marketing executives from Rhodia. Rhodia.com's mission is to recommend E-commerce, collaboration, and innovation products for the rest of the company, but it isn't forcing any division to adopt a specific product or project-management methodology until it's ready. In the meantime, the low cost of Microsoft 2002 Project Server and Project Professional ($179 for Project Web Access, $799 for Project Server, and $999 for a Project Professional license) make them a good place to start.
The project-portfolio management market, especially as it relates to IT project management, is maturing through partnerships, acquisitions, and the entry of big enterprise software players such as PeopleSoft Inc. Other vendors in this arena include Artemis International Software, Changepoint, Lawson Software, Niku, Pacific Edge, PlanView, and Primavera (also the dominant large-scale project-management software). SAP and Oracle also are entering with project-management and project-portfolio management tools with tight ties to their enterprise resource planning products. Almost every vendor has links to or builds vertical or niche applications for Microsoft Project, or does both.
The cost of entry can be steep. Licenses for robust systems, excluding installation and upgrades, start at $200 a seat for low-end users and $1,000 or more for a power user, so software will typically cost $50,000 or more for a midsize company. Consulting and integration add another $50,000 to $200,000. When you add more power seats, bring in management-practices specialists to develop good governance, and provide training to all levels of users, it becomes a million-dollar investment.
But if project-portfolio management is rolled out, well, like a project, the benefits can be impressive. Estimates link project-portfolio management efforts to about a 30% return on investment over the first full year. At Horizon, the company hasn't killed any projects yet, but Miller hopes that's because of the rigor that managers have to go through to get projects approved. "There's a visibility and accountability now that wasn't there before," she says. "Some people don't like it; they feel it cramps their style. But the results have been great."
Illustration by Peter Bennett