By Harald Matzke, Executive Adviser at Serviceware Performance
Whether it’s the implementation of new software or the use of innovative technologies such as RPA, the opportunities and challenges that arise in the context of digitalisation are manifold. Many companies face challenges due to the complexity of converting systems and processes: high costs as well as investment effort and the lack of time and resources. The project landscape for many companies is becoming increasingly confusing, which repeatedly leads to errors in project management. For example, project resources are planned twice, schedules and deadlines are not met, the budget is not adhered to or, in the worst-case scenario, the project fails completely. Unsuccessful IT projects are not uncommon, especially with large-scale projects, such as initiatives for digital transformation. Despite this, research from Citrix has revealed that three in four IT leaders (77%) see opportunities for success in past digital transformation failures.
IT projects fail – but why?
There are many reasons why IT projects fail. Errors occur both before and during the project phase. Often it is due to the scope of work, which was inadequately defined in advance. Companies also repeatedly underestimate the scope and impact that IT projects have on the entire business. Quite often, they plan too little time, so that even at the beginning, important targets can only be met with difficulty.
So how should companies proceed? First of all, they should ask themselves two questions:
- Are we running the right projects?
- Is our project implementation result-oriented?
The intersection of these two core issues is the project portfolio, which maps the projects already underway and those awaiting a decision. A good portfolio management should actively add and remove projects in order to achieve the intended transformation goal. Portfolio management is an important basis for comparing resource supply and demand and making it transparent for all stakeholders. In project scoring, defined criteria can be used to make a comparison of different project alternatives as objective as possible. Especially when so-called hard and soft facts have to be taken into account, project scoring provides valuable support for the most diverse investment scenarios.
The goal at the beginning of planning is to find a project or product portfolio that is as balanced as possible in terms of opportunities and risks whilst also promising long-term success. Project costs must also be calculated here. In addition to classic cost types such as personnel, travel or material costs, these also include those that have a special significance in the project context, for example external consulting services. Project cost management includes both planning and actual plan comparison as well as regular revision during the project in order to have a clear picture of the costs incurred at all times. Adjustments only work if there is continuous and complete project reporting. Here, the achievement of project goals is to ensure that the business is attaining a desired outcome.
The importance of keeping an optimal overview of projects
To get a clear overview of the status and development of projects, companies often use a number of different tools and applications such as Excel or PowerPoint. In principle, both are solid tools for calculating projects and creating reports. However, they quickly reach their limits as soon as the requirements increase. Modern tools are therefore essential, especially when managing complex IT project portfolio. If a tool from the performance management area is chosen, non-financial indicators can also be taken into account and serve as a basis for business decisions. Parameters such as “service level performance” not only indicate the pure cost aspects of a new project, but also take into account the scope and quality of the service provided.
But what should performance tools do in order to make the described planning steps more efficient? First of all, the most important requirement is integration into existing systems, making sure that it meets the needs and requirements of the company and the respective projects. Often, individual systems (product data management, enterprise resource planning or operational project management) already exist in the company and the data only needs to be merged and prepared.
The chosen solution should also provide a transparent view of the entire project portfolio in relation to the resource and capacity situation. Information should be stored “multidimensionally” (project view, organizational view, time, data types in forecast versions) and analyzed using standard reports and ad hoc evaluations. The forecast view also helps to simulate potential future portfolios and predict their impact on the future cost situation and resource utilization.
Furthermore, the tool should offer the possibility to develop business cases that can serve as a basis for comparison for later versions of the project. By filing them in a central database, the assumptions in the business case can be continuously refined over time and supplemented with facts and key figures such as net present value, payback period or internal rate of return (IRR) can be calculated. Organizations should also be careful not to use business cases only as an initial means of defining the project scope and evaluating the economic viability, but to keep an eye on them on an ongoing basis. Unfortunately, experience shows that few organizations open up the initial business case at the milestones and, in particular, review the initial assumptions and objectives after the project has been completed. In some cases, this would be important in order to see that projects are no longer goal-oriented and would possibly contribute more to success if they were stopped, thus freeing up the resources used for other projects and tasks.
Two sides of the same coin: project and people
With performance management tools, a close link to business strategy and operational planning and budgeting can be achieved, which brings more transparency to react in time to rapidly changing developments. Besides all the technical possibilities that can be used to implement IT projects, however, the human factor must not be forgotten. Changes and transformation are usually unpopular because they often trigger concerns about being replaceable or having to give up privileges and routines. Involving the affected groups of people and open communication regarding the introduction of new software that will impact the company and the work is crucial. Managers should always deal honestly and openly with employees’ concerns and wishes and communicate changes in the course of the project promptly. Then nothing will stand in the way of project portfolio success!