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Trends in Portfolio Management How organisations are learning new ways to balance risk and reward Sam Higgins Research Director December 2008

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Who is Longhaus? <ul><li>Longhaus is a research publisher and advisory company with a specialty in technology </li></ul><ul><li>We publish business reports and advise executives and management across Australia's government, business, and consumer sectors on the application and direction of technology </li></ul><ul><li>Our directional research reports are utilised by both SME and major organisations across the world </li></ul><ul><li>Through our AAA (Access All Areas) advisory service we answer big business questions that most often pertain to customer, product or services markets – strong focus on government </li></ul><ul><li>Strong international and technology research experience </li></ul><ul><li>Leading industry voice in press and media broadsheets </li></ul><ul><li>Queensland founded and headquartered </li></ul><ul><ul><li>Website: 5,000+ site visits per month </li></ul></ul><ul><ul><li>Website: 12,000+ page visits per month </li></ul></ul><ul><ul><li>Website: 7-10 minutes per visit </li></ul></ul><ul><ul><li>Blog: 3,500+ hits </li></ul></ul><ul><ul><li>Newsletter: 2,500+ distribution per month </li></ul></ul><ul><ul><li>Downloads: 1,000+ per month </li></ul></ul><ul><ul><li>8,400+ SlideShare visits </li></ul></ul>Commercial-in-confidence

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What was the Longhaus 2008 Project & Portfolio Management Study? <ul><li>Jointly launched January 2008 with CA </li></ul><ul><li>Created to provide insights into the local PPM practices </li></ul><ul><li>Included both business and technology professionals </li></ul><ul><li>Organisations from across Australia and New Zealand </li></ul><ul><li>Large organisations (200+ employees) </li></ul><ul><li>Mix of private and public sector (50-50) </li></ul>Commercial-in-confidence

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Agenda <ul><li>The need for Project Portfolio Management (PPM) </li></ul><ul><li>Understanding PPM </li></ul><ul><li>PPM adoption in Australia and New Zealand </li></ul><ul><li>Implementation of PPM </li></ul><ul><li>Challenges facing PPM adoption </li></ul><ul><li>Questions </li></ul>Commercial-in-confidence

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The facts are brutal, but must be faced <ul><li>Planning over emphasises “new investment” </li></ul><ul><li>Projects fail to meet their objectives </li></ul><ul><li>Firms focus on annual measurement </li></ul><ul><li>Financial measures dominate </li></ul><ul><li>Regulation of economic, social and environmental factors is increasing </li></ul>Commercial-in-confidence

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Organisations are using a variety of tools in an attempt to improve the status quo Commercial-in-confidence

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<ul><li>Providing integrated governance from the strategic to the operational level </li></ul>With PPM being a key to effective integration between the various approaches Commercial-in-confidence Operational Is the work getting done? Tactical Is the work being done right? Strategic Are we doing the right work? <ul><li>Determine the type of work </li></ul><ul><li>Assess the impact on the firm & resources </li></ul><ul><li>Assess the impact on the portfolio </li></ul><ul><li>Approve the investment </li></ul><ul><li>Manage the production of results </li></ul><ul><li>Govern the activity </li></ul><ul><li>Control and manage tasks </li></ul><ul><li>Determine the process used to generate outputs </li></ul><ul><li>Defines standards and procedures </li></ul><ul><li>Ensures control at the task and team level </li></ul>PPM PPM

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<ul><li>Longhaus defines Portfolio Management as: </li></ul>But remember…Portfolio Management is not just Program or Project Management Commercial-in-confidence The process of identifying, prioritising, authorising, directing and controlling projects, programs and other related services using quantitative analysis to achieve business goals and objectives while balancing risk and reward.

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In Australia and New Zealand Interest and adoption of PPM continues to increase Commercial-in-confidence

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Unfortunately existing approaches don’t ensure PPM success Commercial-in-confidence

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So what is driving PPM adoption? <ul><li>Top 5 Perceived Benefits of PPM </li></ul><ul><ul><li>1. Better alignment of projects to outcomes </li></ul></ul><ul><ul><li>2. Effective and objective prioritisation </li></ul></ul><ul><ul><li>3. Increase executive reporting and visibility </li></ul></ul><ul><ul><li>4. Supporting business growth plans </li></ul></ul><ul><ul><li>5. Accurate budgeting and forecasting </li></ul></ul><ul><li>And 44% of firms who adopted PPM realised these benefits </li></ul>Commercial-in-confidence

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But …barriers do exist for implementation of PPM <ul><li>Top 5 Perceived Barriers for adoption of PPM </li></ul><ul><ul><li>1. Skill level of existing staff </li></ul></ul><ul><ul><li>2. Maturity of the organisation </li></ul></ul><ul><ul><li>3. Not considered mission critical </li></ul></ul><ul><ul><li>4. End user resistance to change </li></ul></ul><ul><ul><li>5. Entry of data multiple systems </li></ul></ul><ul><li>As a result organisations then struggle with the basics such as effective prioritisation, management of resources and project dependencies </li></ul>Commercial-in-confidence

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Prioritisation and alignment are not achieved through simple reviews Commercial-in-confidence

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Portfolio Management is not just about Projects Commercial-in-confidence

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Maybe Project Portfolio is the wrong starting point <ul><li>The biggest savings can be found in optimising existing assets </li></ul><ul><li>Begin with Asset Portfolios! </li></ul><ul><ul><li>ITIL driven CMDBs make an ideal data source </li></ul></ul><ul><li>These areas can yield average savings of 20% </li></ul>Commercial-in-confidence

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Project Portfolios do not only exist in IT making PPM a key tool for business decisions Commercial-in-confidence What level of Project Management Organisation exists in your firm?

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And in most organisations PPM is not just used by IT and the CIO <ul><li>Sponsored by the CIO when: </li></ul><ul><ul><li>Project management in place </li></ul></ul><ul><ul><li>Centralised IT services </li></ul></ul><ul><li>Sponsored by the CFO when: </li></ul><ul><ul><li>Activity base costing is in place </li></ul></ul><ul><ul><li>Decentralised or outsourced IT services </li></ul></ul>Commercial-in-confidence

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Ultimately effective PPM cannot be implemented with a spreadsheet <ul><li>PPM requires well managed information </li></ul><ul><ul><li>Software support is crucial to successful PPM </li></ul></ul><ul><li>Key features include: </li></ul><ul><ul><li>Flexible value criteria beyond just dollar value </li></ul></ul><ul><ul><li>Risk assessment capability </li></ul></ul><ul><ul><li>Workflow to support the PPM processes </li></ul></ul><ul><ul><li>Integration from high level data to project level detail </li></ul></ul><ul><ul><li>Shared repository for planned versus actual data </li></ul></ul><ul><ul><li>Headless implementation for portal / dashboard integration </li></ul></ul><ul><li>Partner with experienced organisations </li></ul><ul><ul><li>Without a standard method software + services are important </li></ul></ul>Commercial-in-confidence

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Yet Australian and New Zealand firm are still taking the PPM journey alone Commercial-in-confidence Do you use external support for your Project Portfolio Management activity?

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Challenges for the PPM in Australia and New Zealand <ul><li>Organisations see value in PPM, but existing frameworks alone are not enough </li></ul><ul><li>Effectively addressing the people (cultural) barriers for adoption </li></ul><ul><li>Addressing the largest cost areas by including Assets not just Projects </li></ul><ul><li>Development of a consistent PPM method </li></ul><ul><li>Breaking the perception that PPM is only about better IT management </li></ul>Commercial-in-confidence

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Source Material <ul><li>Successful Portfolio Management Unifies ICT Management Practices , Longview, September 2006 </li></ul><ul><li>Increasing Digital Regulation will drive ICT spending In already saturated market , Longview, December 2007 </li></ul><ul><li>Portfolio Management - How Australian and New Zealand organisations are learning new ways to balance risk and reward , Whitepaper, July 2008 </li></ul>Commercial-in-confidence

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Thank you <ul><li>Longhaus Head Office </li></ul><ul><li>Level 30, AMP Place </li></ul><ul><li>10 Eagle Street </li></ul><ul><li>Brisbane QLD 4000 </li></ul><ul><li>Longhaus Research Centre </li></ul><ul><li>7/269 Abbotsford Road </li></ul><ul><li>Bowen Hills QLD 4006 </li></ul><ul><li>p: +61 7 3868 4796 </li></ul><ul><li>f: +61 7 3303 8445 </li></ul><ul><li>[email_address] </li></ul><ul><li>Sam Higgins </li></ul><ul><li>Research Director </li></ul><ul><li>[email_address] </li></ul><ul><li>+61 412 621 014 </li></ul>Commercial-in-confidence