The decision to implement a project portfolio management application should be supported by a business case, like any other project: what is the return on investment (ROI) of a ppm tool? What are the benefits and how do you transform these into financials? According to a Forrester study, the ROI of a project portfolio management application can be as high as 250%. We discuss four benefits to include in the business case.
1. A decrease in projects with limited to no added value
Project portfolio management support companies to link projects to the strategy. When the contribution of projects to the strategy is unknown or lacking, some projects are implemented with no or limited added value for the organisation. The resources used during these projects could have been utilised much more efficiently.
Next, a ppm application provides a central picture of all initiatives. This helps to prevent having different projects working to achieve the same objective, or worse, having initiatives that have a conflicting goal. In organizations where there are more than 20 ongoing projects, having a central overview is already a challenge.
Suppose that by using a ppm application, one project per year is not started because it is clear from the start that it should not get any resources. Considerable savings are made by not using these resources. This amount will be different for each organization, but with an average six-month project with 4 resources that spend 25% of their time on it, the amount will soon increase to EUR 30K. Although with internal resources, this money would have been spent anyway, but they could have spend their time on projects that bring significant value for the organisation.
2. Fewer projects with cost overruns
By keeping a close eye on the projects and programs financially, budget overruns quickly become visible. It is important to evaluate the financial impact of the entire project portfolio and to intervene in time. A good ppm application provides insight into the budget, the actuals and the updated forecast figures. With this data, timely choices can be made to grant projects extra money where necessary, but also to put projects on hold or to stop them prematurely.
Research shows that the use of a central project portfolio management application leads to 10% less cost overrun on average. With a project portfolio budget of 2 million euros, this quickly results in a saving of 20 K EUR. In addition, the saved costs can be used for new projects that add value.
3. More successful projects
Implementing projects well is an art in itself. Often a project takes longer due to a longer timeline than planned, a lack of resources, unexpected issues and risks. Here too, the uniform reporting on the current project portfolio ensures that the managers involved can intervene as soon as possible. Projects with a shorter duration means that the resources can be used for other activities that add value.Next to that, the faster a project is completed, the quicker the benefits are realized. Based on research, a ppm application ensures an average shorter lead time of 10%. This allows an organization to pick up 10% more projects on an annual basis and therefore to realize more benefits in a shorter timeframe.
4. Administrative savings
Last but not least, compiling a complete and up-to-date portfolio status is quite a challenge without a project portfolio management application. Companies without a good ppm process supported by a central application, commonly have several employees working to collect and consolidate the input from project and program managers. A saving of half an FTE is more than realistic, which quickly amounts to 30K euros.
In short, the business case for a ppm tool is easy to make. The costs for a good ppm application are quite modest compared to the above benefits. Often it is even a fraction of the benefits that an an organization achieves by investing in a solid project portfolio management application.