Manage IT Projects Like Financial Portfolio

Manage IT Projects Like Financial Portfolio

Few insurance companies today have any budget for mistakes, and few projects produce more internal anxiety than information technology projects.

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

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

Insurance companies across the country are confronting the dual challenges of legacy technology applications and limited IT budgets. The challenge that lands on the shoulders of CIOs and CTOs is choosing the best combination of projects that map to the insurance companys corporate strategynot just in the short term, but in the long term as well.

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

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

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

Some insurance companies are turning to a new method to track the progress of their IT projects, a concept called project portfolio management (PPM). PPM has its origins in the techniques applied to manage financial portfolios.

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

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

PPM software is an analytical application that allows users to ensure that project investments are aligned with key business objectives, optimizing resources, and decreasing project failure rates. PPM solutions automate and support the project lifecycle of prioritization, selection, execution and completion, providing strategic analysis at each point in this process.

The real value of a PPM solution is that it can provide an organization with a unified view of all its IT projects by viewing multiple projects across multiple metrics, including ROI, risk and strategic alignment.

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

PPM solutions give organizations a structure for planning and evaluating IT projects by requiring a business case for each project. Using a Web-based PPM system, anyone in the organization can submit a project request by completing a form online with the nature of the request, its priority, estimated benefits and time-to-benefit, estimated cost, and the requested timeline for beginning and finishing the project. By standardizing required project information and metrics, managers can intelligently compare and prioritize IT project requests.

One of the challenges IT departments face is convincing non-technical executives of the value of an IT project. A PPM solution not only provides insurance companies with a common yardstick with which to evaluate different projects, but when combined with a data warehouse, which consolidates data from multiple sources, they can analyze their operating costs and then choose the projects with the highest projected ROI.

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

When a project enters the implementation phase, the PPM system will automatically send out a warning if a project is falling behind schedule, could run over budget or is falling out of line with an firms strategy. If, for instance, an implementation specialist is behind schedule on fixing a bug in the new wireless inventory system, an e-mail alert is sent to the specialist and to the project manager. If more resources are needed to address an issue, managers can review the projects priority to determine what resources to commit.

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

Frank Siderio is director, Global Enterprise Solutions, for PeopleSoft 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 serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.