Why You Need a Project Management Office

Companies seeking more efficiency and tighter monitoring of IT projects are opening project management offices in growing numbers. But don't expect a quick fix, easy metrics or an immediate payback.

Reader ROI

• Why companies are turning to PMOs
• How your peers are using PMOs
• The challenges of measuring PMO effectiveness

For years, IT departments have struggled to deliver projects on time and within budget. But with today's emphasis on getting more bang for the buck, IT has to rein in projects more closely than ever. That challenge has led many to turn to project management offices (PMOs) as a way to boost IT efficiency, cut costs, and improve on project delivery in terms of time and budget.

While not a new solution, the trend towards implementing PMOs to instil much-needed project management discipline in IT departments is spreading fast. "More people lately have been talking to me about PMOs than they have in the last 10 years," says Don Christian, a partner at PricewaterhouseCoopers. PMOs can help CIOs by providing the structure needed to standardise project management practices and facilitate IT project portfolio management, as well as determine methodologies for repeatable processes. In the US the Sarbanes-Oxley Act - which requires companies to disclose investments, such as large projects, that may affect a company's operating performance - is also a driver, since it forces companies to keep closer watch on project expenses and progress. WW Grainger, an industrial products distributor, has a PMO that "enables us to complete more projects on time and on budget with fewer resources," says Tim Ferrarell, senior vice president of enterprise systems.

But PMOs are no panacea for project challenges, including battling today's tepid business climate. For one thing, there is no uniform recipe for success - it's important that the PMO structure closely hews to a company's corporate culture. PMOs also won't give organisations a quick fix or deliver immediate, quantifiable savings. And companies with PMOs report that they don't necessarily yield easy-to-use cost-saving benchmarks and performance metrics. In a survey conducted by CIO (US) and the Project Management Institute (PMI), 74 per cent of respondents said that lower cost was not a benefit of their PMOs.

However, survey respondents still reported positive benefits from the formation of a PMO, even if quantifiable ROI is elusive. Out of 450 people surveyed, 303, or 67 per cent, said their companies have a PMO. Of those with a PMO, half said the PMO has improved project success rates, while 22 per cent didn't know or don't track that metric, and 16 per cent said success rates stayed the same. There is also a strong link between the length of time a PMO has been operating and project success rates: The longer the better. While 37 per cent of those who have had a PMO for less than one year reported increased success rates, those with a PMO operating for more than four years reported a 65 per cent success rate increase. The top two reasons for establishing a PMO, according to the survey: improving project success rates and implementing standard practices. In a finding that indicates PMOs' importance, a survey-leading 39 per cent of respondents said the PMO is a strategic entity employed at the corporate level, meaning it sets project standards across the enterprise and is supported by upper managers.

There are two basic models of PMOs: one that acts in a consulting capacity, providing project managers in business units with training, guidance and best practices; and a centralised version, with project managers on staff who are loaned out to business units to work on projects. How a PMO is organised and staffed depends on a myriad of organisational factors, including targeted goals, traditional strengths and cultural imperatives. When deployed in line with an organisation's culture, PMOs will help CIOs deliver strategic IT projects that satisfy both the CFO and internal customers. Over time - and CIOs should allow three years to derive benefits - PMOs can save organisations money by enabling better resource management, reducing project failures and supporting those projects that offer the biggest payback.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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