The ROI of Project Portfolio Management

Budget is typically the first place teams start when evaluating any software and PPM is no different. What is the price? Many people get frustrated when they don’t get a straight answer to this question or the pricing requires explaining. What is important to remember is that price isn’t everything – the underlying question is what is the ROI. The higher the price, the higher the ROI expectations and the bigger the risk of taking on a new solution. While price plays a role, and can help compare different solutions to a baseline, the real value of the solution, and all your effort to obtain one, lie in the value it will bring to your organization.

The Price of PPM

Let’s start with the pricing conversation. There are different calibers of solutions on the market and the price will generally reflect the playing field you are on. But not all teams need a solution that offers a luxury model with all the bells and whistles. Similarly, a basic solution with minimum functionality will find a team restricted and back on the market sooner than they might like. A bit of a Goldilocks conundrum, it’s important to align the solution with your needs with a little room to grow into. That said, there are some basic pricing requirements that are pretty universal that might help distinguish solutions and cut down on the noise.

Number of users

While teams don’t often think in “user count” terms, software vendors do. If you are inquiring about a price you’ll typically get asked right back how many users (or licenses) you are going to need. Most SaaS-based solutions operate on a cost-per-user with a per license per month (or year) for the use of the software. Some have a flat rate license fee, others have tiered pricing, but sometimes you can save a good amount of money by distinguishing your users between different license types. Consider these:

1. Admin users: power users of the system that will need full control and ability to customize settings

2. Power users: project managers, resource managers, or those that need all the functionality but not the control to be able to mess things up

3. Casual users: team members or resources that will need access to the system to input data or get assigned tasks

4. Time and expense: lowest tier of user that just needs to log time against a project or add expenses. Not all solutions have this option and it usually comes with a nominal fee

Not all vendors have various levels of users and others have more options for user types, but it helps to have a quick headcount of who will be needing access to the system and the level of permissions they will need to get an idea of the pricing you can expect.

Setup or other one-time fees.

Tools that have an easy plug-and-play model might not have a setup fee or implementation cost but any solution that has rich functionality and complete portfolio management will likely have an implementation or setup cost. This is because they require a level of customization to work with your business and training to ensure success. These fees are often fixed but again, you might be able to save some money upfront with a little extra planning. Consider:

How much of the implementation will be on the vendor?

If your team has an internal operations person that can dedicate time to learning the system or has used a similar system in the past, you might be able to share the cost. If you have people that are only available part time then the implementation might fall heavily on the vendor which will lead to a heavier price to implement and onboard.

How much training will be required?

For teams that have a high maturity of project management process and knowhow, training might be minimal. Other organizations that have casual project managers with less structure might need more training to get value from the system.

Are we doing a phased rollout?

For teams that are piloting a solution within one department and planning to rollout a solution to a broader organization later might be able to save on initial setup costs and add services later. Onboarding an training a large number of users and projects will require a high level of data loads and testing to ensure adequate support.

The ROI of PPM

Researching, evaluating, selecting, and implementing PPM is no small feat. It is the system that powers the PMO and runs the business. The value of the solution far outweighs the cost of procuring – both from a time and money investment. It is important to view return-on-investment (ROI) as both a “soft” and a “hard” ROI perspective - we discuss return-on-investment vs. return on opportunity (ROO) in calculating the return on your project portfolio management investment. Here are some common examples that help tie value to measurable outcomes.

Increased Visibility & Alignment

The most common reported benefit of a PPM solution is better visibility of projects and resources. While visibility itself doesn’t have an exact metric, it can be valued by improved project selection and staffing of the highest value work. Measuring the number of projects that support strategic business goals and assigning weighted metrics to those business level targets provides data on how aligned the PMO is, how much it is contributing to those objectives, and what the status is of any given project toward that goal.

Data Integrity

Another hugely beneficial aspect of PPM with various ways to measure its effectiveness. Any business professional will be able to tell you there is value in having accurate and reliable data for various reasons. One measurable, hard ROI benefit is it reduces project waste. Knowing how many resources are overstaffed, which projects will be pushed because of it, and where efficiencies can be gained will vastly improve the overall PMO operations.

Decision Making

A powerful value add from any investment is the ability to make better, more informed decisions. For PPM, this might come in the form of evaluating which projects are the best investments for the business, modeling different scenarios to decide which is the best to move forward with, or which projects need to be cut because they are not delivering on intended results. All of these measurable results provide benefits to the business much greater than the software itself.

PMO Credibility

Many PMOs are establishing their value and moving from an administrative to a business-focused perception. Regardless of individual goals, improving PMO credibility through by delivering on desired results helps PMOs become more valuable to the business and better leaders within their organization. This can be measured by forecast accuracy, spend analysis, and benefit realization tracking. Establish your PMO as a driver of business success by delivering the projects that are critical for business innovation.

ROI by the Numbers

Our customers typically report breaking even on their spend within the first 3 months after implementation and positive ROI within the first year. That varies from organization to organization, but most start with a baseline and find within the first year they have exceeded their expectations. Here are common reported area of money saved to hit ROI targets.

Time to Market

Those PMOs without a PPM solution in place and those with one see vastly different results on the whole portfolio as they are able to get more accomplished with the same resource pool. They are also better able to align to strategic initiatives delivering on better projects, faster. One PMO reported completing 78% more projects in a year just from implementing PPM software.

Project efficiency gains

Research shows that PPM can reduce project duration by 10% and cost overruns by 10% just through better visibility and management which could yield savings of about $2m per year, depending on typical project costs. Our customers put this efficiency closer to 20%.

Resource utilization

A 5% improvement in utilization yields $1 million in annual savings for a 100-person resource pool (varies based on average annual salary of resources). Most PMO organizations see utilization improvement lifts of 10% or higher due to adopting a PPM solution.

Reduced time of reporting

Manual effort and reporting can require as little as one full day a month per FTE project manager. Depending on how many people are spending time on data gathering and frequency, one KeyedIn customer reported time spent reported was cut in half due to a centralized system.

Forecast accuracy

The ability to accurately forecast business spend and delivery of projects is beneficial to the business. PPM improves forecast accuracy through improved information and data integrity yielding improved forecasting and planning.

Beyond Price

While price and ROI are major factors in selecting the right PPM tool, it is important to consider the depth of these two elements and understand the impact on the other. Determining budget and how much to spend often increases the ROI expectations. But this isn’t a negative thing, rather provides a benchmark for the business and targets for growth. What’s also important to consider is the opportunity cost of a solution – more than just the price. How much does a major change cost the business, how much time will be invested in getting a new way of working. Conversely, what’s the opportunity cost of not investing in a solution. What are you missing out on and how much more could you have done had you implemented sooner. These are all important areas for consideration as you evaluate the amount you are willing to spend, the effort you are willing to put forth and the return you are expecting to see. Selecting the right PPM tool to help you get to those levels of expectations and avoid the cost of implementing the wrong tool.

Why KeyedIn?

If you have established you need a PPM solution (or a considering a new PPM solution), it is important to get the right one. Going through the process to evaluate and select can take months, and months longer still to implement and change working habits to get the system up and running. The last thing you want to do is go through the process all over again. So let’s look at a few key areas that make KeyedIn different from other vendors on the market and let you and your team decide if these are areas that align with your interests.

Professional Services

Meeting the team that will be with you for the long haul is important for any consideration. Professional services are important not just in the selling of the software but in the implementation and adoption long term. Getting to know how much changing your team will be doing to get the system in place vs. how much the system will configure to your needs is important when evaluating a solution. The level of professional services offered by the vendor and the attention they are willing to give shows before the contracts are signed.

Customer churn

Related to professional services, it is important to get an understanding of how much churn a vendor typically has. Sometimes customers aren’t right or their needs change and that is to be expected. But if you see signs of vendors selling for the sake of selling, those customers will likely churn and fast. Consider if you want a solution that will be a partner for you and your team long term.

Beware of the “one size fits all” solution

No solution can do everything. It’s not practical and it isn’t even ideal. For portfolio management solutions, it is important that they are able to offer PMO-specific functionality and provide a strategic benefit for your business. Solutions that offer too much end up doing it all, but doing it poorly.

Pure PPM

For strategic PMO leaders, it is best to partner with a PPM tool that provides just that – PPM. Many solutions on the market have adapted their software to also be a portfolio management tool or added another category to their mix that meets that need, or they even acquired a company that filled that gap in their offerings. This can be dangerous because PPM isn’t their primary focus and it is difficult to get feedback to be considered.

Feedback loop

Not every feature request or product inquiry can be accommodated, but part of selecting the right PPM tool means that you are able to voice your concerns or make requests for product enhancements or offering updates. Likewise, when changes are made, you want a provider that communicates those updates and provides a forum for customers to share ideas and hear from product leaders. Keeping products up to date, sharing roadmap ideas and valuing customer feedback is a sign of a PPM partner that is in it for the long run.

Powerful Products. Passionate People. Profitable Portfolios

There are many other reasons that make KeyedIn a great PPM partner and we invite you to learn more about our team, our products, and our services options. In addition to features and functionality that support our customers goals and growth, we pride ourselves on our PPM-first approach and as an established portfolio management vendor that knows our market and prioritizes fit for our solutions.

Project Portfolio Management has never been so important. Explore the Changing Project Portfolio Management Landscape in the first installment of Mastering Project Portfolio Management.