The Hackett Group: Most Companies with Project Management Offices See Higher IT Costs, No Performance Improvements
November 01 2012 - 9:30AM
Business Wire
Project Management Offices (PMOs) fail to help most companies
reduce IT cost or improve performance, according to new research
from The Hackett Group, Inc. (NASDAQ:HCKT). In fact, companies with
high utilization of PMOs see materially higher IT costs while also
failing to deliver projects with higher ROI or better on-time and
on-budget performance, according to the research. The research also
found that companies have significantly reduced their use of PMOs
over the past three years, in part due to their inability to
positively impact performance.
The Hackett Group's research details the flaws that cause
traditional PMOs to fail as an IT strategy, and also provides
insights into the key PMO practices of world-class IT
organizations, which rely on PMOs almost universally and generate
superior results, including cost reduction and improved IT
effectiveness.
"Since the recession, many companies have simply given up on
PMOs. And with good reason," said The Hackett Group IT Advisory
Practice Leader John Reeves. "The way most companies implement
PMOs, they have become large bureaucratic organizations with myopic
viewpoints. Too often they focus on practices that simply create a
drag on the organization, facilitate design weaknesses, increase
complexity and drive up maintenance and support costs. It's a
shame, because the paradox is that our research also shows that
when used properly, PMOs can be exceptionally effective at driving
quality and reducing complexity. That's why they're a key best
practice at virtually every world-class IT organization we've
studied."
The Hackett Group's analysis, which is based on a review of IT
metrics from in-depth benchmarks conducted at more than 200 large
global companies over the past two years, debunks the common
misconception that PMOs reduce costs. In fact, companies with high
PMO usage see the opposite trend. While not all the cost increase
is necessarily attributed to PMO utilization, The Hackett Group's
research finds that behaviors associated with PMOs at typical
companies become pervasive and drive materially higher IT costs. A
key part of this is operating costs. The Hackett Group's research
found that companies with low PMO utilization actually see 32
percent lower operating costs than companies with high PMO
utilization.
The study also found that high PMO utilization did not drive
better business outcomes or project delivery performance. Companies
with high PMO usage showed virtually identical ability to deliver
projects on-time or on-budget. They also showed virtually identical
ability to achieve anticipated benefits, achieve stated ROI
targets, and deliver to specifications.
PMO usage has been on the decline since 2009, the study also
found. The percent of infrastructure projects managed by PMOs has
dropped by over 20 percent, while its use for application projects
has dropped by nearly 18 percent. Overall, only 53 percent of all
IT projects are currently managed by PMOs, down nearly 12 percent
points since 2009. The size of PMOs has also been shrinking,
according to The Hackett Group's study, with the average number of
FTEs dedicated to PMO activities falling by 41 percent from 2009 to
2011. On a relative basis, FTEs dedicated to PMO activities dropped
from 6% of total IT staff in 2009 to just 2% in 2011.
Meanwhile, The Hackett Group's research showed that companies
with world-class IT organizations, which operate at 15 percent
lower costs and higher effectiveness levels than typical companies,
rely heavily on PMOs and use them for over 95 percent of
application development and infrastructure projects. The research
also identified the four key practices that world-class IT
organizations rely on to enable them to reverse the trend seen by
typical companies and use PMOs to improve IT efficiency and
effectiveness. These are: centralized IT demand management;
accountability for business benefits; standardization of processes
and architecture; and program and project reviews. These practices
enable world-class IT organizations to effectively utilize PMOs to
drive IT complexity reduction, improve ROI, and more frequently
deliver projects on time and on budget.
"These four practices are the key to propelling a PMO forward,
and generating real results in terms of reducing IT complexity,
better business outcomes, and improved project delivery
performance," said The Hackett Group Principal and Global IT
Transformation Practice Leader Rich Pople. "Their impact cannot be
overstated, and world-class IT organizations understand that.
"For example, companies which show high utilization of
centralized demand management practices are able to deliver
projects that meet specifications, achieve anticipated benefits,
and achieve their ROI targets four times more often than those with
little or no demand management," said Mr. Pople. "At the same time
these companies are also 63 percent more likely to deliver projects
on time and on budget. It's tough to argue with results like
that."
About The Hackett Group
The Hackett Group (NASDAQ: HCKT), a global strategic business
advisory and operations improvement consulting firm, is a leader in
best practice advisory, business benchmarking, and transformation
consulting services including strategy and operations, working
capital management, and globalization advice.
Utilizing best practices and implementation insights from more
than 7,500 benchmarking studies, executives use The Hackett Group's
empirically-based approach to quickly define and implement
initiatives that enable world-class performance. Through its REL
group, The Hackett Group offers working capital solutions focused
on delivering significant cash flow improvements. Through its
Archstone Consulting group, The Hackett Group offers Strategy &
Operations consulting services in the Consumer and Industrial
Products, Pharmaceutical, Manufacturing, and Financial Services
industry sectors. Through its Hackett Technology Solutions group,
The Hackett Group offers business application consulting services
that help maximize returns on IT investments. The Hackett Group has
completed benchmark studies with over 2,800 major corporations and
government agencies, including 97% of the Dow Jones Industrials,
86% of the Fortune 100, 90% of the DAX 30 and 48% of the FTSE
100.
More information on The Hackett Group is available: by phone at
(770) 225-7300; by e-mail at info@thehackettgroup.com.
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