Managing Your IT Projects Like A Financial Portfolio Pays Off
Few insurance companies today have any budget for mistakes and few projects produce more internal anxiety than information technology (IT) projects.
IT projects have a lot of variables–cost, 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 organizations is how to mitigate the risks associated with IT projects and ensure that all IT projects not only come in on time and on budget, but that they are in line with the organizations corporate strategy.
It is also critical to have a closed loop system–including 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 reality is that companies can only fund IT projects that provide maximum business value.
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 strategy–not just in the short term but in the long term as well.
The danger companies run into 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 time–for 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 these projects and the overall direction of the organization. Therefore, there is no assurance that a project that comes in on time and on budget will lead to optimal success for 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, theyre 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 truly to 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. Using a PPM solution, an insurance company brings the strategic direction of executives down to the level of individual projects and individual project managers.
A key component of a PPM solution is that rather than evaluating projects once a year, it monitors and analyzes them continuously. Portfolios continuously are 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, the estimated benefits and time-to-benefit, estimated cost, and the requested timeline for beginning and finishing the project.
By standardizing the required project information and metrics, managers or executives can intelligently compare and prioritize IT project requests.
One of the challenges IT departments face is convincing nontechnical 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 the project easily can 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 organizations 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 established metrics and priority of the project to determine what resources to commit.
With real-time visibility to the status and progress of all initiatives, insurance IT departments can better allocate both time and money to generate the maximum return from limited resources. The ultimate goal is not just on-time, on-budget IT projects but on-time, on-budget projects that make a material difference in an insurance organizations bottom line, as well as in its long-term strategy.
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.
is director, Global Enterprise Solutions, for PeopleSoft Inc., based in Pleasanton, Calif.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 8, 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.