The ROI of Project Portfolio Management - Is it Worth All That?

In 2009, the project management benchmark survey CHAOS report from The Standish Group also showed "44% of projects were "late, over budget, and/or with less than the required features and functions." Furthermore, it showed that only 32% of all projects were delivered on time, on budget, and with required features and functions, and 24% failed altogether!

Clearly, something is wrong in project management land.

One way to help turn those numbers around could be to invest in a Project Portfolio Management (PPM) solution that helps you maximize the return from your portfolio by efficiently allocating resources and spending to your best projects and helping you drop your losing projects fast.

But how can you decide if a Project Portfolio Management solution is right for your company?

Maybe you think your project portfolio budget isn't large enough to justify the investment or that your department or company isn't large enough. Probably the best way to determine if a Project Portfolio Management solution is right for you is to calculate the Return on Investment (ROI) that you might expect from implementing a PPM solution.

Return on Investment or the Rate of Return is the amount of money that a firm can expect to gain or lose relative to the amount invested.

To calculate the ROI for implementing a business process change solution such as a PPM solution, you'll want to know the bottom-line dollar value costs and benefits that you could expect over a selected time period. To calculate these, you may need to know:

  • Industry benchmarks for key business drivers and estimated metrics
  • All Project Portfolio Management benefits
  • All Project Portfolio Management costs including implementation and ongoing support costs
  • Any reduced benefits as your organization "comes up to speed"
  • Your discount rate for net present value (NPV) calculations
  • Estimated best and worst case outcomes to calculate a risk-adjusted "most-likely" model

For a Project Portfolio Management solution, you can expect benefits in three areas: project execution speed, real bottom-line returns to the business, and increased project management efficiency. Each of theses areas is summarized below:

1) Increased Project Execution Speed:

  • Vastly more effective project budgeting decisions
  • Assigning right skill sets and expertise to projects
  • More agile resource allocation
  • PPM workflow visibility
  • Easier tracking and visibility of key project metrics
  • Faster report generation

2) Bottom-line returns to the business:

  • Increased number of projects completed successfully because of efficiency
  • Fewer low-value projects due to portfolio analysis and value scoring
  • Increased productivity from available resources
  • Focus on high-value projects
  • Improved risk management
  • Faster achievement of overall strategic goals

3) Increased Project Management Efficiency:

  • Shorter project meetings
  • Faster decisions based on rigorous systematic analysis
  • More effective reporting and oversight
  • Improved ability to synchronize projects

You can expect to incur costs in a number of areas as well, including:

  • Planning, training, and implementation
  • Hardware costs
  • Initial software license fees
  • Annual fees and maintenance
  • Solution customization
  • Ongoing consulting and training

Many of these benefits and costs are going to be highly dependent on the particular solution that you are considering, so you'll want to develop a template that you can use to compare different PPM solutions with each other.

Data Machines offers a free spreadsheet template worksheet for easily calculating the return on investment (ROI) for any project portfolio management tool that accounts for all of these benefits and costs.

If you're looking for a Project Portfolio Management solution with state-of-the-art analytics for robust and defensible project portfolios, then click here to take a look at Optsee®, our project portfolio management tool. We have "cracked the code" of project selection by making it easy for ordinary business people to apply state-of-the art business analytics to project prioritization and portfolio optimization for results that are both understandable and defensible.

Next: Project Portfolio Management - Optimization Using Genetic Or Evolutionary Algorithms

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