The Positive Momentum of Challenging Times
As the pressure is on to stay profitable in a period of economic down-turn many companies decide to stop or postpone major IT programs and projects without short term tangible benefits. While the result of doing so is immediate cost relief, a broader look at the project portfolio can yield surprising results.
The good thing about a down-turn situation is that it will expose projects which have already been questionable for a long time. Examples could be:
- That agile project that dragged on for too long due to methodology discussions
- The 3 year service oriented architecture (SOA) project
- A 2 year data warehouse project
- The 4 year global production system where the first 2 years were spent on design
- A secret in-house private cloud project that somebody is working on
The CEO will see these projects on the corporate "big ticket" list and start asking challenging questions about the cash flow, benefit profile and risk of the projects.
Whereas in the past these projects were protected by the label "strategic investments", there is suddenly a momentum for reconstructing these projects and others with them.
Five Criteria for a Healthy IT project Portfolio
Having studied a large number of companies and project portfolios, Oleto Associates have observed that high impact portfolios typically fulfil 5 criteria:
- Each project must be valuable. Projects must independently deliver accumulated benefits greater than the cost, so infrastructure projects should be broken into parts and bundled with other projects, e.g., dividing a data warehouse project into 5 sub-projects and integrating these into deliverables for more tangible projects such as ERP.
- Value must be delivered stepwise. Each project must have a value milestone at least every six months.
- The business must have the required organisational change capacity. There is no reason to insist on the existence of a large IT project if the business is not ready to receive it, e.g., the focus is on organisational restructuring.
- IT must have the delivery capabilities. If the IT organisation or external provider has failed with a global IT project once, then there is a chance it could happen again unless corrective measures are taken, such as realigning leadership, governance and methodologies.
- The entire portfolio must be manageable. It must be structured into transformation themes and each project linked to these. Too many single projects cannot be managed, while problems that are too large are also challenging to manage.
Restructuring a project portfolio typically takes 4 to 8 weeks depending on the scope and available transparency.
About the authors: This article was written by a team of consultants from Oleto Associates, a strategy consulting firm based in Denmark. For more information please visit www.oleto.com.