THOUGHT LEADERSHIP WHITE PAPER

CUTTING INFORMATION TECHNOLOGY COSTS WITH PPM: HOW PROJECT PORTFOLIO MANAGEMENT CAN REDUCE IT EXPENSES BY 30%

Introduction

IT organizations worldwide are being hit by a perfect storm. Amidst the economy dragging down demand across industries, IT departments are still expected to perform flawlessly and improve continuously, with fewer resources and less money.

Global economic conditions aside, the network must stay up. New capabilities must be deployed, systems maintained, products delivered and divisions supported.

Help is on the way. While many organizations have grown to think of their IT budget as a fixed expense, or perhaps even a necessary evil, hidden in every line item are opportunities to reduce costs, increase the strategic value of IT and better align resources with organizational priorities. To seize these benefits, IT organizations need to utilize Project & Portfolio Management (PPM) and consistently incorporate the disciplines of Portfolio Alignment, Demand Optimization and Application Rationalization to ensure that they invest in the right initiatives, support the right applications and take the right action to keep IT work on track.

Eliminate Waste Through Better Alignment

Every organization faces an inevitable disconnect when resources, activity, and direction fall out of alignment. And with misalignment comes Waste. This is perhaps most apparent within an IT department as the client example below illustrates.

The PowerSteering customer was a diversified, global manufacturing conglomerate where a newly appointed Corporate CIO inherited a $500M IT budget, along with 29 international regions and 29 deputy CIO’s who each had their own priorities and budgets. The new CIO had no idea where or how effectively the IT budget was being spent. Step one was to establish visibility across the global portfolio to assess the current status, projected ROI and budget of each active item.

PowerSteering Software 25 First Street Cambridge, MA 02141 1.866.390.9088 www.powersteeringsoftware.com 2

In just 3 weeks he was able to create an inventory of his entire IT portfolio. In week 4, he cancelled 20% of the active projects and re-deployed the resources to more important priorities. How? It turned out to be surprisingly easier than he expected. Each of the cancelled projects were either not aligned with the current strategy, targeted at systems to be retired, redundant with other projects already completed or underway, or so far off track that they needed to be completely redefined and re-scoped.

Many global organizations struggle with this kind of portfolio rationalization and management. With distributed operations, outsourced processes, complex requirements, and the natural tendency for organizational activity to be uncoordinated, the “20% rule” is almost universally applicable. The challenge is finding the misaligned expenditures and having the tools and determination to do something about it!

Reassess, Reprioritize & Rebalance

Portfolio alignment is not just a one-time occurrence. It requires ongoing reevaluation and readjustment in response to incoming demand requests, changing business needs, and shifting corporate priorities. Even after trimming the fat, IT organizations that don’t have real-time visibility of their portfolio health are doomed to drift back to lower levels of effectiveness and declining business performance. Managing demand, regular review, and corrective action

are the three keys to keeping an IT portfolio on track. An integrated chemical manufacturer was faced with too many opportunities for process

PowerSteering Software 25 First Street Cambridge, MA 02141 1.866.390.9088 www.powersteeringsoftware.com 3

improvement and not enough resources for executing them all. Using PowerSteering’sIdea portal, the company was able to create a pipeline of improvement requests, evaluate that pipeline through a feasibility, specification, scoring, prioritization and approval assessment, and ultimately optimize the overall value of their project portfolio. As a result, the averages IT project ROI increased by 33% and satisfaction of project participants and their internal customers more than doubled.

In addition to optimizing demand, regular portfolio reviews and corrective action are critical components of a successful governance process. Conducting a monthly assessment of which programs are on track, which are delivering, and which aren’t can improve success rates by 30% or more. All organizations have initiatives that drift off track, have faulty assumptions, or just flat out fail. The key is nipping these efforts in the bud, making go/no go decisions early, and redeploying resources to more promising efforts. That is the benefit of a real-time, closed loop execution process.

Run IT Like a Business

IT work encompasses much more than projects, so why limit your use of PPM to just projects? Portfolio management principles should be applied to the non-discretionary, “run the business” work performed by IT, including application development and management. After all, what CIO wouldn’t appreciate complete visibility of the entire IT spend?

By leveraging PPM capabilities, organizations can set spending

goals, cost reduction targets, and SLA metrics to truly manage IT like a business. It’s not unusual to see run the business areas achieve a 30% service improvement and a 10% cost reduction when these activities are properly measured and managed.

Managing IT assets is another example of how PPM can help reconcile the relationships between all types of spend: applications, projects, and ongoing Help Desk support. The process starts with identifying the applications that spawn projects (upgrade AP, decommission AR, etc.) and drive other elements of total cost (maintenance, upgrades, training, service requests, etc.)

PowerSteering Software 25 First Street Cambridge, MA 02141 1.866.390.9088 www.powersteeringsoftware.com 4

Many clients use PowerSteering to rationalize their entire application portfolio using this simple process:

Create an inventory Score applications based on technology, value, or strategic fit Verify application compliance with enterprise architecture Capture costs, risks, performance measures, and SLA compliance Identify overlapping or redundant services Decide – upgrade, replace, decommission, or maintain Execute the projects that will maximize the application portfolio

An insurance industry client used a similar process to determine which applications and assets to enhance and which to consolidate, and was able to eliminate nearly 20% of its applications, reduce non-discretionary IT expenses from $400M to $200M and save $20M in application spend over a 3 year period. As an additional benefit, the organization now spends a third of its budget on maintenance and two thirds on growth and strategic initiatives – the inverse of the typical ratio in most organizations.

Conclusion

PowerSteering Software 25 First Street Cambridge, MA 02141 1.866.390.9088 www.powersteeringsoftware.com 5

Implementing the governance processes of Portfolio Alignment, Demand Optimization, and Application Rationalization can easily save 30% or more of your departmental budget while improving service and execution against strategic objectives. The dismal trio of economic downturn, increased internal demand, and rising costs doesn’t need to take your IT organization by storm. With the right tools and effective means of strategic alignment, and portfolio visibility, IT teams can weather the downturn and be prepared for the inevitable return of growth and brighter days.

Read the full white paper now.

PowerSteering Software 25 First Street Cambridge, MA 02141 1.866.390.9088 www.powersteeringsoftware.com 6

ABOUT POWERSTEERING SOFTWARE

PowerSteering Software is the leader in business-driven project & portfolio management (PPM) solutions for managing IT Governance, New Product Development, Performance Improvement, and other Business PMO initiatives. Its easy-to-use software provides executives at BayCare, Johnson Controls, Merck, PolyOne, Shaw Industries, UK National Health Service, US Department of Defense, and over 140 other customers with executive visibility, strategy alignment, and team productivity to drive strategy and accelerate results across the organization. PowerSteering was rated “Strong Positive” in the "MarketScope for Project and Portfolio Management Applications" published by Gartner, Inc.