1. deltek.com1
Article
ERP for project-focused
organizations
By Henk Jan Onstwedder, Managing Director, Deltek Benelux
Many service provider organizations that carry out projects still have problems with
the allocation of people and resources across project and line activities. People are
loaded more than one hundred percent because the organization cannot manage
to make up-to-the-minute information available by department, subsidiary or
country. At the same time there is no real-time view of costs and progress. This is
a way of working which is obviously unsatisfactory for companies which run many
different projects with employees with different backgrounds, and who need to
be drawn from different parts of the company. An integrated project and resource
planning tool is therefore a ‘must’, if a project-focused organization wants to be
successful. Software support can help here.
In 2010 the Aberdeen Group published the results of research1
into the success factors for projects in the professional services
sector. The research organization interviewed representatives
of 315 organizations about their project results and to what
extent they make use of project management software. On
the basis of the results of that research, the Aberdeen Group
identified a number of characteristics of those organizations
which performed above average in the area of projects.
These ‘best in class’ organizations succeeded in delivering
91 percent of projects on-time or earlier, and completed 96
percent of projects within budget. For the projects which were
not completed within budget, the average overrun was seven
percent. These organizations also saw an annual increase of 37
percent in the profitability of their projects.
1 Delivering Project Profitability, on time and under budget, Cindy Jutras,
Nuris Ismail, 2010.
Success factors
The Aberdeen Group researchers found that almost three
quarters of the successful organizations used software to
integrate project and resource planning. For 57 percent of
these organizations these solutions had been shifted from
the desktop (read: Excel) to the level of the organization
as a whole. In addition, 53 percent of the organizations had
themselves defined and documented best practices for project
management. These figures show therefore that there is added
value to be gained from using a company-wide application for
planning, scheduling, management and reporting and cost-
price calculation. And that is exactly the scope of Enterprise
Resource Planning (ERP) for project-focused organizations.
2. deltek.com2
Article
ERP for Project-Focused Organizations
Added value
Traditional company information systems are primarily focused
on the organization’s production and logistics activities, which
work with physical products. Software systems are used to
support such areas as production planning, routing of raw
materials, semi-finished goods and finished goods, bill of
materials and MRP calculations for materials requirements.
These solutions are much less suitable for supporting
project-driven organizations in their project management.
Therefore, over the last few years, systems have come onto
the market which are specifically developed for this sector
with comparable functionality to support the whole project
cycle. Examples of this functionality are: support for project
structures (WBS), project budgeting, time and cost registration,
determining WIP positions for projects and project and
resource planning which are fully integrated with the financial
management of the organization.
Integration potentially adds value at each stage of a
project, and starts at the client acquisition stage. Every project
organization knows the importance of good budgeting when
bidding. But there are few organizations that make use of the
knowledge that they gained previously in this area. An ERP
system specifically for project support helps here, by making
previous budgets and actual data available. In addition it is an
excellent tool for creating precise and realistic budgets.
Implementation
In many companies there is a clear split between the acquisition
and the implementation of a project. In many cases the finance
department has to create a project after it is acquired, before
staff can book time and costs to it. In some organizations,
days, and sometimes even weeks, are lost here. This is both
undesirable and unnecessary, because with an integrated
system it can be done quite literally with one press of a button.
All information has already been collected and described
anyway during the client acquisition process, so it is simple
to convert it to a concrete project plan, including its budget,
project phases and other relevant data. This not only saves
time, but also reduces the risk of error which is inevitably
involved in non-integrated information systems.
Indissoluble links
Integration with resource planning is another important part
of an ERP system for project organizations. Projects stand or
fall depending on enough availability of the right employees at
the right time. Correctly allocating the right people to a large
number of project paths is a complex puzzle and if you do not
solve this puzzle correctly it can cost an organization a lot of
money. An increase in the average utilization rate of just one
percent, in a company with one hundred billable employees,
will very quickly add up to an increase in turnover of at least one
hundred thousand euros. With no change in costs, then the
same effect can be expected in the earnings before tax.
The impact of resource planning goes further still. The
project manager also knows at all times whether there are
enough people available to carry out the project as agreed. He
or she therefore will not suddenly be surprised that too little
progress has been booked as a result of there not being enough
people. And if the schedule shows that extra capacity is needed,
then the resource planning outcome will suggest which other
employees are actually available.
Project planning cannot manage without resource planning
and vice versa. It is not possible to create a good resource plan
without knowing which activities an organization needs to carry
out in which projects. And a company cannot create good
activity plans if it does not know whether employees of the
right caliber are available in order to carry out the schedule. The
availability of a resource planning module within ERP provides
the information needed here.
3. deltek.com3
Article
ERP for Project-Focused Organizations
Special challenges
In exceptional circumstances, such as today’s economic
climate, the need for a project management ERP is reinforced
even more strongly. Margins are under pressure, so that
professional service vendors need to be even more careful
in their project implementation. Small margins leave too
little room for errors. In this kind of situation it matters for an
organization whether it is constantly up to date with the current
financial situation in each of its projects.
Providing up-to-date information
This example can be taken further. One effect of today’s
economicclimateisthereducedavailabilityofcredit.Thismakes
it all themoreimportantfororganizationstowatchtheirworking
capital closely. In the case of projects based on actual costs,
havinganup-to-dateviewofthehoursworkedandcostsincurred
is essential for quick and accurate invoicing of customers.
An ERP system ensures there is a direct link between these
hours and costs and customer billing. In a project on a fixed-
price basis, normally completion of a given project phase means
you can bill the customer. Without an ERP solution, a project
manager has to expressly inform the finance department when
each of these milestones is reached. With an ERP solution,
this is managed by the employees on the project themselves
on the basis of progress reports. When all the activities for a
phase are complete, the project manager is sent a message that
an invoice can be sent and a workflow then ensures that the
finance department is informed.
Pressures Actions Capabilities Enablers
• More competition
• Lower prices
• Lower margins
• Definition and
implementation of
a standard project
methodology based on
best practices
• Investment in technology
support for projects
• Project management and
project implementation
are integrated and
coordinated with
customer service and
delivery organization
• Business development
and project managers
work together on realistic
customer expectations
• Decision-makers are kept
informed of progress
in real time and can
intervene immediately in
the event of disruptions
• real-time insight into all
costs
• Continuous monitoring of
customer satisfaction
• Project planning
• Project management and
reporting
• Project cost calculations
• Tools for cooperative
working tools
• Bidding process
• Contract management
• Workflow-automation
• Sub-contractor
management
• Document management
• Change management and
control
• Service management
PACE Framework: Consistent overview of possible actions and potential advantages of employing technology to raise project
activities to a higher level.
Source: Aberdeen Group, 2010
