Manage IT Projects Like Financial Portfolio

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Few insurance companies today have any budget for mistakes, andfew projects produce more internal anxiety than informationtechnology projects.

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IT projects have a lot of variablescost, project length and,especially, the successful outcome of the project. They ofteninvolve technology that is new and foreign to many executives onthe business side of the organization. The question for mostinsurance firms is how to mitigate risks associated with ITprojects and ensure that all projects not only come in on time andon budget, but are in line with the firms corporate strategy.

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It is also critical to have a closed loop systemincludingplanning, budgeting, executing, monitoring and evaluating.

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Insurance companies across the country are confronting the dualchallenges of legacy technology applications and limited ITbudgets. The challenge that lands on the shoulders of CIOs and CTOsis choosing the best combination of projects that map to theinsurance companys corporate strategynot just in the short term,but in the long term as well.

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The danger companies run is that of only addressing immediatepain points rather than taking a more strategic view of their ITneeds. Success with IT project planning requires careful evaluationof business strategy, financial analysis, and most importantly,real-time collaboration with business leaders.

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In the past, executives have struggled with various techniquesfor evaluating IT projects, using technologies that monitor singleprojects in isolation. These technologies look at one project at atime and one metric at a timefor example, measuring the success ofa project based solely on its return on investment.

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While they can ensure the effective management of individualprojects, these applications dont provide a link between theprojects and the overall direction of the organization.

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Some insurance companies are turning to a new method to trackthe progress of their IT projects, a concept called projectportfolio management (PPM). PPM has its origins in the techniquesapplied to manage financial portfolios.

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In this case, IT projects are collected in an IT portfolio andtreated as investments. Like financial investments, they'rereviewed and controlled as one set of interrelated activities. Thisapproach ensures IT projects are well-balanced in terms of size,risk and payoff, while facilitating better alignment between IT andthe business and controlling costs.

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While technology to manage IT projects has been available forthe last few years, only recently has it become sophisticatedenough to truly assist executives with prioritizing workload,ranking initiatives by business value and managing resources.

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PPM software is an analytical application that allows users toensure that project investments are aligned with key businessobjectives, optimizing resources, and decreasing project failurerates. PPM solutions automate and support the project lifecycle ofprioritization, selection, execution and completion, providingstrategic analysis at each point in this process.

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The real value of a PPM solution is that it can provide anorganization with a unified view of all its IT projects by viewingmultiple projects across multiple metrics, including ROI, risk andstrategic alignment.

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A key component of a PPM solution is that rather than evaluatingprojects once a year, it monitors and analyzes them continuously.Portfolios are continuously reevaluated during the course ofproject execution to ensure that assumptions were correct and thatprojects are behaving as intended. This gives management actionablereporting for the continuous optimization of resources andportfolio performance.

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PPM solutions give organizations a structure for planning andevaluating IT projects by requiring a business case for eachproject. Using a Web-based PPM system, anyone in the organizationcan submit a project request by completing a form online with thenature of the request, its priority, estimated benefits andtime-to-benefit, estimated cost, and the requested timeline forbeginning and finishing the project. By standardizing requiredproject information and metrics, managers can intelligently compareand prioritize IT project requests.

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One of the challenges IT departments face is convincingnon-technical executives of the value of an IT project. A PPMsolution not only provides insurance companies with a commonyardstick with which to evaluate different projects, but whencombined with a data warehouse, which consolidates data frommultiple sources, they can analyze their operating costs and thenchoose the projects with the highest projected ROI.

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With a Web-based PPM solution, information is available in realtime. Once a request is in motion, all of the stakeholders in aproject can easily monitor its progress, from initial requestthrough budgeting, review, approval and, finally,implementation.

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When a project enters the implementation phase, the PPM systemwill automatically send out a warning if a project is fallingbehind schedule, could run over budget or is falling out of linewith an firms strategy. If, for instance, an implementationspecialist is behind schedule on fixing a bug in the new wirelessinventory system, an e-mail alert is sent to the specialist and tothe project manager. If more resources are needed to address anissue, managers can review the projects priority to determine whatresources to commit.

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Insurance companies need to balance their immediate IT needswith their long-term architecture goals. A PPM solution providesthe right level of structure, planning and analysis to do so.

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Frank Siderio is director, Global Enterprise Solutions, forPeopleSoft Inc., based in Pleasanton, Calif.


Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, September 1, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.


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