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Whitepaper: Making the case for PPM
Before investing in PPM tool you will almost certainly be asked to provide a Business Case for the investment. Our own experience, supported by independent research, shows that clients can achieve a Return on Investment of 6-9 months and significant year-on-year savings through an investment in PPM tools.
This white paper provides advice on how to construct a compelling Business Case for your organisation’s investment in PPM tools.
There are many reasons why organizations decide to implement project portfolio management solutions, but typically it is to help senior management confidently and consistently answer questions like:
- Are we doing the right projects, the ones that provide maximum value to the organization?
- Are we doing these projects right, meeting the quality, time and cost objectives?
- Are we using our resources in the most cost-efficient manner?
- Are we realizing the benefits from our projects and programmes?
- Can we take advantage of this new opportunity and re-balance our project portfolio?
- How can we accommodate this “must-do” project within the current portfolio?
- Are we going to be able to deliver next year’s investment plan?
Whatever the drivers are, before investing in Project Portfolio Management (PPM) tools you will almost certainly be asked to provide a Business Case for the investment.
Our own experience, supported by independent research, shows that clients can achieve a Return on Investment of 6-9 months and significant year-on-year savings through an investment in PPM tools.
This white paper provides advice on how to construct a compelling Business Case for your organisation’s investment in PPM tools, and includes some independent research into the value of PPM tools.
Building a Business Case
The Business Case for investing in PPM tools is really no different to any other Business Case, because it requires you to clearly explain:
- the benefits that will be realised when the PPM toolset is fully implemented
- the costs of the implementation
- the Return on Investment and the payback period
Most PPM tool implementations also involve improvements to the way projects, programmes and
portfolios are run. Therefore it is important to recognise that benefits may be attributable to changes in
process as well as changes in toolset.
a) The benefits of using PPM tools
Broadly speaking, there are three types of benefits that need to be considered:
- direct cost savings
- tangible benefits
- intangible benefits
Benefits Definition and Benefits Management are only truly effective when the benefits are measurable, and this means that in order to justify the investment in PPM tools you will need to measure the way your organization is currently working.
For example, if you are expecting to reduce the time (and hence the cost) of preparing monthly management reports then you will need to measure your current preparation time (and cost) and to define a target time (and cost) for the future.
Benefits - direct cost savings
Each organisation has its own reasons for implementing PPM tools, and its own set of expected benefits and operating costs.
Below are typical direct cost savings which can be attributed to the use of PPM tools.
Benefits - tangible benefits
There are many potential tangible benefits that can be attributed to the introduction of PPM tools, as illustrated below.
However, it can sometimes be challenging to establish good, accurate, repeatable measures for some of these.
Benefits - intangible benefits
Intangible benefits are benefits that do not have a directly attributable financial value. However, often with some creative and careful thinking it is possible to attribute financial figures to intangible benefits.
Below are some typical intangible benefits from the implementation of PPM tools.
b) Costs of implementing PPM tools
The costs of implementing software cover people, process and technology. The table below itemises the typical cost items for implementing PPM software.
c) Return on Investment and Payback Period
A classic Return on Investment (RoI) analysis looks at the Costs versus the Benefits, and how long it will take to realize the benefits.
Using the information gathered from assessing the Benefits and the Costs in your organization, the following table can help you build the RoI case.
Independent research into the business value of PPM tools
Gantry Group profiled the payback experiences of eight companies that had deployed PPM tools for at least one year.Key conclusions:
- Six of the eight achieved a positive ROI within one year
- Software returned 6.5% saving of total IT budget in year one
- 14% savings (NPV) achieved over three years
How were these tangible benefits achieved?
- Reduced project budget overruns
- Avoidance of spend on non-value-adding projects
- Reduced staff costs due to improved staff loading/utilization
- Reduced project reporting/governance expense through PMO automation
- Improved Project Manager efficiency through project status reporting automation
Forrester Group profiled the payback experiences of four companies that had deployed PPM tools. Their key conclusion was that the average payback period was two months, achieved by:
- Increased productivity through PPM process standardization and automated reporting
- Cost savings through PMO automation
- Increased accountability for project spend
IDC conducted research into the value added by PPM with 13 highly successful companies that had implemented PPM solutions.
Their key conclusions were that on average:
- The payback period was 7.4 months
- Cost per project was reduced 37%
- Redundant projects dropped 78%
- IT staff productivity increased by 14%
- Project failure rate dropped 59%
PPM tools will help senior management answer strategic questions like “are we still doing the right projects?” and “are we still doing them right?” but the decision to invest in PPM tools always needs to be supported by a compelling Business Case.
We have many clients who have followed the approach described in this White Paper and who have achieved a significant ROI and a payback of less than 9 months when implementing our own project portfolio management tool PM3.
About the author
David Walton - I am David Walton, Programme, Project and Portfolio Management specialist and director of Bestoutcome here in the UK. We make the PMO tools PM3, PM3time and PM3NHS, the only PMO tools designed by practitioners for practitioners.