Let me preface this post by saying, Apptio is a big proponent of Project Portfolio Management (PPM). We believe a customer who is already using a PPM system to manage projects is one step ahead of the game. With a market expected to surpass the $1B mark by 2012*, PPM is a well-established software category helping IT manage the projects side of the IT business. However, as Gartner recently noted in its Project Portfolio Management Magic Quadrant**, “Potential buyers of IT PPM systems face many challenges. They need PPM systems, but PPM as a technology alone cannot help an IT department.” One great example of an area where PPM alone cannot (and, should not) be solely relied upon is managing the financial performance of an entire IT operation.
The primary goal of PPM is to manage IT projects—the project schedules, resources, dependencies, and portfolio of projects within the Project Management Office (PMO). It is predominantly focused on the human capital element. But it’s widely known that in most organizations the PMO’s area of responsibility accounts for only 20% to 30% of the overall IT budget, and IT operations accounts for the other 70% to 80%. IT leaders need a way to manage the financial and quality performance of the entire IT function. That’s where Technology Business Management (TBM) enters the picture.
When we talk to customers who are using PPM we get one of two reactions. Either, they like what they are getting from PPM but recognize its limitations and are ready to implement a more holistic solution for Technology Business Management. Or, they are adamant about trying to make PPM work for managing the finances of IT. For this latter group, it’s simply the wrong tool for the job.
The most notable shortcoming of PPM with respect to tracking the cost and value of IT is that it does not account for the cost of hardware, software, operations labor, facilities and overhead—the cost of IT operations. These are Run-the-Business (RtB) expenses. In actuality, RtB costs represent the bulk of IT’s budget, about 70% to 80% of it. This is the greatest area of opportunity for long term cost reduction. Cutting projects to reduce cost is a short-term gain, while shooting yourself in the foot over the long term by killing innovation and service improvements. Only by reducing cost in RtB does IT improve their cost efficiency over the long run.
Given this comparison, it’s easy to see how PPM would fall short of providing the insight and analysis companies need to really take a bite out of IT costs. PPM was purpose-built to accomplish a much different goal. Its origin was in project management—tracking the tasks, dependencies and resources required to successfully complete a discrete project. From there, PPM expanded to managing the portfolio of IT development projects. It simply wasn’t designed to track the costs and quality of the entire IT operation, provide data analytics to drive cost optimization decisions, enable proper performance reporting, or automate key IT business processes. These are very different technological challenges for a very different set of users.
Technology Business Management (TBM) focuses on collecting the cost, quality and operational data to report on IT’s performance, drive better business decisions and automate common IT-Business processes (i.e., budgeting, forecasting, chargeback, performance reporting, etc.). This requires a unique combination of data integration and management (collection & management of cost, quality and operational data), next gen data analytics (BI for financially informed decisions) and business process automation. Using PPM solely for this purpose is like using a scissors to cut your lawn.
For example, a typical TBM use-case scenario would be, “How do I understand the Total Cost of Ownership (TCO) of any given service (from cradle to three-year maintenance), how do I drive cost reduction of that service, properly manage business demand, and report on cost and quality to key business constituents?” This level of analysis requires accurate costing and quality data (integration with existing ITSM and PPM solutions), data analytics to empower IT domain mangers to proactively cost optimize, and reporting capabilities to keep business managers informed and acting with full knowledge of what it costs to run IT. PPM provides none of this.
We have been and always will be huge fans of PPM. Mature PPM implementations enable an accurate analysis of 20% to 30% of the IT budget, and the ability to track cradle to grave service lifecycle costs. PPM is a valuable data feed to TBM. Apptio coexists and integrates seamlessly with all major platforms. We are simply urging customers to heed Gartner’s advice by not relying solely on PPM for all the answers when the solution requires a much different, more holistic approach.
*"IDC MarketScope: IT Project and Portfolio Management, 2009 Vendor Shares," (document number 219087) July 2009
** Gartner ”Magic Quadrant for IT Project and Portfolio Management” (document number G00200907) June 7, 2010