There are almost as many reasons for project failures as thereare failed projects, but the success rate for business initiativeshas been given a boost with the advent of project management. Mostcarriers no longer turn over business projects to IT professionalswho know the technology but not the business. The importance ofmaking projects successful can be seen in the amount of moneycarriers are spending on new projects. In its most recent survey ofCIOs and CTOs, research group Celent found 31 percent of budgetsfor large carriers in 2006 was spent on new projects, with an evenmore impressive 42 percent spent by midtier carriers onprojects.

The lack of a clear project strategy is an easy trap forcompanies to fall into when it comes to project planning, contendsNorm Buckwalter, managing advisor, innovation and planning, withAccident Fund Insurance Company of America. "It's challenging forany organization to shift its focus from day-to-day tactical issuesto long-term strategic goals for the company," he says. "All of uscan get absorbed in tactical demands for our customers and ourinternal staff because these are tangible, important, and right infront of us."

When it comes to managing projects, the factors that affect costand schedule are fairly common across most industries, commentsDavid Seaver, managing director of the information technologypractice for PRICE Systems, a consultant group that estimates andanalyzes the effort, schedule, and cost of projects. "The thingsthat impact the cost of IT don't change when you go from businessarea to business area, and they don't change that much when you gofrom COBOL technology to JAVA and browser based," he says. "Theystill are fairly consistent."

Accident Fund has been successful in separating the strategicfrom the tactical, Buckwalter believes, because the innovation andplanning team he manages is focused on the development andexecution of the strategic plan of the company. The enterpriseproject management office (PMO) is housed within the innovation andplanning team, but Buckwalter points out his group doesn't manageevery project in the company and doesn't want to. "The team isfocused on successful implementation of those 40 to 50 keyinitiatives that are part of our 2010 strategy and beyond," hesays. Decisions on which projects to helm don't always come down todollars, though. Buckwalter notes risk and complexity can be justas important as finances, but he adds, the overriding driver isstrategic–those projects that help Accident Fund pursue itsnational expansion and become easier to do business with. Theexecutive staff supplies the vision for Accident Fund, explainsBuckwalter. Once the vision has been formulated, it goes to theinnovation and planning team to determine how the company convertsit into reality.

Karen R.J. White, senior director consulting services in theproject management practice for the consultancy PM Solutions, wouldlove to see more of her clients bring the PMO into strategicplanning. "It ensures projects the PMO undertakes have an alignmentto corporate strategies, and if the alignment is not there, [thePMO] can ask the hard questions," she says.

Even when the CIO is part of the strategic planning, White findsthe CIO and the PMO frequently are not totally aligned. "Sometimesthe PMOs are seen as project administrative offices, not projectmanagement offices, and they are viewed as an extension of theorganization's financial arm," she says. "All they are responsiblefor is cranking out status reports and just reporting on theprojects."

Not every business can afford to dedicate internal staff to aPMO, however. At Gray Insurance Co., projects are not so complexthe carrier needs to have a project management office, explainsCarl Schneider, CIO.

What Schneider and his IT team battle in managing projects arethe many ingrained processes within the company he and his staffare trying to change. "Part of what we're trying to do is turn ITinto a utility," he says. "I really don't want people coming to meand asking how to run their businesses, because I'm not an expertin the insurance business. I'm trying to push the decision-makingpower out of my department and back into the [business] departmentswhere the subject-matter experts exist. I want to provide thesupport and infrastructure and platform for those tools they needto get their job done. I want to focus on that and that only."

Accident Fund uses fewer vendors than one might think, given thenumber of initiatives going on, reports Buckwalter. Typically,projects are staffed and led by internal resources, but he adds,there are occasions the carrier looks to the vendor community notonly for the best technical solution in the marketplace but alsofor the experience the carrier may not have. "We can use [thevendors] to overcome some of the short-term spikes we have inresource needs, but our goal most often is to learn to fish forourselves," says Buckwalter. "We have some strong long-term vendorpartnerships, but we see it as more cost-effective and, quitefrankly, prudent to have that expertise under our own roof."

Seaver often finds vendor estimates on the length and complexityof projects to be optimistic and urges carriers to proceed withcaution in such cases. "It's a best-case, sunshine type of approachto how much it is going to cost and how long it is going to take,"he says. Vendors need to get their foot in the door to make thesale, and then it becomes a negotiation process. "That happensevery place: small businesses, the federal government, biginsurance companies," he observes. "Part of the problem [with suchestimates] is vendors have blinders on because they have a genericapproach and don't always know the business until they get involvedand start to install and configure things. And then there alwaysare surprises."

Accident Fund is a midsize company with a little more than $500million in net premium earned. The company employs fewer than 1,000people, indicates Buckwalter. With that size, the carrier wants itsvendors to provide guidance and accountability. "We look forguidance in that as we continue to update our legacy systems, wehave a great opportunity to reap the benefits of someservice-oriented architecture so our telephony, our documentmanagement, and our core claims and policy systems can worktogether with the rest of our infrastructure," he says. "Any givenvendor is bringing only a component to that overall solution.Accident Fund needs to own the whole pie. Each vendor isresponsible for a slice of that pie, but we want to make sure wekeep our pie from being part coconut cream pie, part apple pie, andpart humble pie."

Occasionally carriers have to place their trust in vendors toassist in managing the project, but Schneider warns carriers oughtto know their business needs and document those needs thoroughly."[Business users] have to understand the difference between a wantand a need," he says. "They must to be able to put together adocument full of needs and wants that can be used as a litmus testfor each of the different vendor packages." Included in thepreparations are things such as the vendor's financials, sitevisits, and a trip to the vendor's corporate office to make sure itis a viable company, explains Schneider. Carriers also should worryabout the size of the vendor. "Are we its largest customer? Itssmallest customer? Or are we in its sweet spot?" he asks. "I'd wantto be within one standard deviation of its average customer."

Vendor relationships vary as much as the solutions, according toWhite. "I've worked with companies in which the vendor justsupplied the CD," she says. "Then there are vendors coming on siteand doing the development with or for your team. These are twodifferent types of vendors and two different types ofrelationships."

A project manager needs to understand the terms of the contractand actually be involved in the negotiation of that contract,continues White. Contract negotiation often takes place at a levelabove the project manager, yet she points out, the project manageris the one who has to live with the terms of the contract. Heradvice is for project managers to read the terms closely,understand the language, and then meet with a counterpart from thevendor to explain the expectations for the project managementteam's performance. Simple items such as vacation time have to bespelled out. "I had one vendor that agreed to let its DBA go on athree-week vacation and then a one-week training session," saysWhite. "You have to partner with the vendor and recognize thevendor is there to make money."

The innovation and planning team at Accident Fund facilitatesthe governance process and prioritization of the tactical projectsfor the carrier, indicates Buckwalter. "It's done this way so wecan help provide some insight into the overall capacity of thecompany from a resource standpoint," he says. "We consciously trynot to be too involved in most of these tactical projects. They arebest led by the various business departments. Strategic projectsfor the enterprise are consciously separated."

Buckwalter finds similarities in strategic projects, whetherthose projects target technology, a merger/acquisition,organizational change management, or business processreengineering. "Strategic initiatives can be all those things," heasserts. "IT is involved in a big percentage of those projects,although the team could take on some projects that don't have a bigIT component behind them."

Sponsorship from the top is the biggest reason for a project'ssuccess, according to Buckwalter, although he couples sponsorshipwith raising the bar for expectations for all team members. "We'vebeen fortunate our senior management recognizes the value of theteam and has offered us opportunities to prove our worth," hesays.

The innovation and planning team reports to a vice president forplanning, and this gives the department a seat at the table at theheart of all the strategic conversations, even those that areexploratory in nature. "I'm not saying we've been successful ateverything, because that would be unrealistic for anyone," saysBuckwalter. "But we do continue to demonstrate an ability todeliver on larger and more complex initiatives, and the teamcontinues to morph itself over time to meet those challenges."

The innovation and planning team was made an independent groupand is not part of Accident Fund's information systemsorganization. "We work an awful lot with the IS team and with a lotof the business units," says Buckwalter. "We are an enterpriseresource that reports to executive staff. It's very atypical."

White believes it is rare to have the PMO operate within thestrategic planning department as it does with Accident Fund. "Tome, it's the right place for a corporate strategic projectmanagement office to exist," she says. "[The PMO has] thevisibility into not just the projects that have IT associated withit but also business projects, such as establishing a new agency oran M&A project that has a much bigger venue than putting in anew application."

More enlightened carriers will look to such a model in thefuture, according to White. "If you take large carriers and realizethe number of projects and initiatives they undertake over a yearthat have absolutely nothing to do with IT, wouldn't it be great ifthere were an organization that ensured all those projects wereappropriately aligned with strategy and appropriately managed so ifone of those initiatives would start to go astray, it would get theappropriate attention?" she asks.

Buckwalter believes much of the success of the team can beattributed to Accident Fund's CEO, Elizabeth Haar. "She's a bigbeliever in the value of project management," he says. "A lot oftimes what we're looking at and researching truly is exploratory innature. If the executive staff generates what looks to be a goodidea, due diligence still has to be done." Part of the innovationand planning team's role is R&D, adds Buckwalter. "Someinitiatives look like they have great business cases behind them,and other times we come back and report the timing might not beright for us," he says.

Trained project managers, often working within a projectmanagement office, have taken the lead role on initiatives with aclear eye on the strategy needed not just for a single project'ssuccess but for the enterprise as a whole. Still, Celent reportsthe biggest staffing need expressed by carriers is in the area ofproject management. Thirty-one percent of insurers surveyed cited aneed for project managers compared with 21 percent that mentionedbusiness analysts and 17 percent for software developers.

Whenever Buckwalter looks to expand the innovation and planningteam, he assesses candidates on five key areas. "First andforemost, team members must be good communicators. We are involvedin so many different things, so communication and coordination area must."

Second, everyone on the team has to have a solid IT backgroundbecause so many initiatives demand that skill set. Third, teammembers need to have a solid understanding of the business and thebusiness processes that go on behind the scene.

The fourth talent is the ability to demonstrate great teamwork.Finally, the team members must be good leaders, states Buckwalter."They need to be the kind of people who are comfortable inconflict, collaboration, and ambiguity, because all those thingsare normal in strategic projects," he says.

When looking for a project manager, White seeks similar traits:someone with leadership abilities who can communicate effectivelywith all levels of the insurance organization. She also targetspeople with the courage to make decisions with less than all of theinformation. Although this can be dangerous, she admits, "sometimesyou can't wait to get all of the exact information. You have to gowith your gut and make a decision." As an example, she mentions newsoftware may not have been tested fully, but the vendor has areputation for quality. "So, you take a calculated risk [thesoftware] is good enough," says White. "Sometimes it is moreimportant to get the software into production rather than wait forall the testing to take place." Another example might involvewaiting for a fourth proposal from a vendor when the project teamalready has three proposals in hand that are all fairly close inprice. "You just go with a decision on the three you have," shesays. "Sometimes just making the decision is more important."

While Buckwalter often finds such abilities in candidates, thosequalities also can be attached to a big ego, in his experience."Eventually, big egos will break apart teamwork," he says."Confidence and ego are two sides of the same coin. I've been luckyto assemble a team that's got those qualities but without the bigego. We're all pretty grounded in reality and have a lot of respectfor each other."

White believes companies should look for people with anunderstanding of the business in addition to the technicalknowledge so the project manager can understand the language of thebusiness sponsors. "That talent is important, especially if you arein a project management office that doesn't have a businessrelationship manager," she says.

There remain organizations that have their lead systems analystfunctioning as the project manager, a situation that White believescan be dangerous for a company. The conflict arises with the volumeof knowledge and the functions those two separate roles mustperform. "If you are busy dealing with an architect about thedesign of an application, you may not be paying attention to thefact some test cases that were supposed to have been done last weekweren't done," White says.

Seaver believes the trend in business is for companies to havetheir own internal PMO. "The only exception I see is if it[involves] something out of the ordinary or trying to get familiarwith a new technology, the company may outsource the PMO," he says."[Companies] want to keep all capabilities internal. Where I see alot of outsourcing [pertaining to projects] is with training andcertification."

However, in White's view, outsourcing of project management canbe an effective alternative for carriers facing critical projectsfor which the carrier lacks the capability to do the workinternally. "Definitely outsource it and bring in people who havethe expertise, and let them drive the project," she says.

In such cases, she recommends a carrier partner someone withinits own staff as a deputy to the outsourcing company so theexternal organization is not the one telling the carrier's peoplewhat to do. "There are some large carriers that outsource certainproject management functions," she says. "They outsource projectcontrol work very successfully. They retain the project managementrole–the decision-maker role–but they outsource the more scientificpart of the job where the reports and the analysis arehappening."

It is getting more difficult to find candidates with knowledgeof project management as well as business and IT knowledge, Whiteaffirms. "Technology is changing so rapidly, it's difficult to stayabreast and be technically astute in everything," she says. It isequally difficult for the project manager to remain current on whatis happening in the business field. "Having that understanding isimportant," she concludes. "To me, project managers in insurancehave to be learning continually. They have to embraceknowledge."