CXO

Financial firm gets rapid payback with portfolio management solution

Niku 6 saved the day for Textron Financial. Confronted with the canceling of older PSA software from Niku, Textron braced for another costly software implementation. The process, however, produced a few good surprises.


Knowing the status of their IT projects is always critical for corporations. But when a company is running hundreds of IT projects simultaneously in 20 major locations, keeping a finger on the pulse of projects becomes increasingly complex—and essential. To accomplish this goal, many companies turn to Professional Services Automation (PSA) software, sometimes referred to as portfolio management tools.

"We could not manage both the velocity and the volume of change to support the business without this kind of tool," said Dave Raspallo, executive vice president and CIO of Providence, RI-based Textron Financial Corp., a $10 billion commercial finance company and subsidiary of Textron Inc. "You could not do it on the back of an envelope or with a lower-level tool that you could build in Excel or something of that nature."

For 10 years, Textron Financial had been using Niku Corp.'s ABT solution to keep tabs on projects. But when Niku announced it was discontinuing the product, Textron Financial faced the choice of a new tool to communicate process improvements and manage the company's hundreds of projects.

Evaluating products
In 2001, Textron Financial began examining its PSA options, among them Primavera System's Primavera Enterprise; Web-based portfolio management solution PowerSteering by PowerSteering Software, Inc.; and Six Sigma Academy's ESSENTEQ. Other products in the PSA space include Changepoint Corp.'s Changepoint ASP; Business Engine's Business Planning and Portfolio Management application module; PlanView's suite of portfolio, project, and resource management tools; and Microsoft Solution for Enterprise Project Management (EPM).

“About 20 competitors exist in the PSA space”, said David Hofferberth, research director and PSA expert at Boston's Aberdeen Group. “Each offering has its own strengths and weakness, but none is inherently that much better or worse than any other.”

In Textron Financial’s case, the company needed a solution that could collect data from 120 technology professionals. It also needed collaboration capabilities for projects in 20 geographic locations; the ability to look at the return on technology capital and project investments; and support for managing, measuring, evaluating, and enhancing processes in order to maintain the company's ISO 9000 certification.

Eventually, Textron Financial chose Niku 6, Niku Corp.'s offering in this space. A huge factor in the decision was Textron Financial's existing relationship with Niku, which was the clear market leader three or four years ago. However, its position has slipped as Niku’s rivals began chipping away market share, according to Hofferberth.

Computing ROI and payback
Along with selecting a product, Raspallo had to prove that the project investment would provide value before he could get funding. Typically, companies rolling out PSA-type projects believe they'll improve staff productivity, Hofferberth said. Aberdeen studied PSA ROI of nine of the top 15 PSA vendors, but Niku declined to participate. The report, "Professional Services Automation: Technology-Enabled Integration of People, Process, and Capital Assets," is available free in an abridged version. According to Hofferberth, the study found an average increase in staff productivity of 8 percent annually. "That would be like getting another 20 days a year to work and bill," he said.

But PSA solutions offer other returns for doing a better job with portfolio management—although some of the benefits have yet to be measured, Hofferberth said. “What, for instance, is the economic value of having people working on the right projects?” he asked. "If everyone used these things the way they should be used, the final returns should be tremendous.” One Boston-based company even boasted an 800 percent ROI with its PSA integration. Ultimately, the decision to go with Niku 6 worked in Textron Financial’s favor, because the $400,000 overall investment will pay for itself two months ahead of schedule in 14 months, Raspallo said.

Phased integration
Such project integrations are not without their hiccups, however. Raspallo said Textron Financial’s integration took nine months to implement and came in on budget, though a bit behind schedule. Raspallo attributed the longer project schedule to a low-balled time estimate based on the assumption that the move from one Niku product to another would be similar to an upgrade. With 20-20 hindsight, he said it was more like a "clean sheet build."

Textron Financial did most of the integration itself with 20 percent of the project cost going to custom development with the assistance of Niku's technical staff. The customization was necessary to adapt the product to match Textron Financial's business processes.

The project rolled out in phases, first in September 2002 with the migration of existing project databases and overhead numbers. Then, the company added resources, budgets, and capital figures. Finally, Textron Financial moved forward with training end users. "We didn't do big bang, but by the end of last year, we were fully operational with the tool," Raspallo said.

Getting project adoption
Among the stickiest things about PSA integrations is getting people to adopt the tool once it's in place. Resistance can come from an aversion to change. "The change management aspect is probably the most difficult because you're really going to alter the way people do their jobs," Hofferberth said.

The way to get around this obstacle is to make sure the project has at least one high-level advocate. "There has to be a project champion that has to support it and work hard with all of the individuals within the organization to show the true benefit," Hofferberth said. That person should educate people about the coming transformations, allaying fears and apprehensions. "If you can give me something and tell me why it's good for me, I can really embrace it," he said.

Adoption of Niku 6 may have come easier at Textron Financial because the new software had a GUI and functional similarities to its predecessor, Hofferberth said. But the product was different enough that Textron Financial designed a thorough training program, using training content it developed itself, classroom-based education for technology trainers, and off-the-shelf tools to expedite and present training to the other users. Among its off-the-shelf tools were WebEx video conferencing and rich media, and CDs to deliver training to employees and managers.

Positive results
Today everyone from the CEO to the end customer is using some aspect of Niku 6. "I use this with the CEO, chairman, COO, and CFO [the people who make up Textron Financial's IT Steering and Focus Committee]," Raspallo said. In part, they use Niku 6 reports as the basis of decisions on how to invest people and capital. The company has a clear view of the day-to-day operational aspects of IT projects associated with networks, data centers, hardware and software tools, and various application suites.

Departmental managers are able to examine resource management issues, time spent on projects, and project cost and progression, among other key metrics. Even external customers have access to their project information via a password-protected extranet.

It's this visibility and high degree of accurate project information that inspires confident decision-making, perhaps one of the most intangible outcomes of effective project portfolio management. "If we follow the methodology and put the right information in the tool, the tool will give us information about how we can deliver projects on time and on budget," Raspallo said. Such benefits make for a tighter-run IT organization and a better corporate bottom line, something that keeps both stockholders and customers happy.

 

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