The Australian IT project landscape

Introduction

Information Technology has been an integral part of many organisations in Australia for a number of decades. The line between traditional businesses and those labelled as Information Technology (IT) businesses has continued to fade with time. Information Technology is now an integral part of the Australian Project Management Landscape. Within this landscape we have seen shifts manifesting in a strong boom and subsequent bust, post 2001. As part of ongoing research and focus on professionalism in project management, EQuest Consulting conducted a survey of major organisations in Australia across varying market sectors to assess the state of project management in the Australian business community. The results of that survey formed the basis for the analysis and comparisons to follow.

EQuest Consulting is a specialist Project Management consultancy based in Sydney Australia, predominately servicing the Australian and Asia Pacific markets. Many of our clients are Information Technology focused in that projects they commission rely on Information Technology solutions to support their business processes and cross organisation functional work efforts.

Survey Objectives

• Determine the 2004 Australian project management landscape, post the recent IT boom & bust cycle.
• Compare findings with international research conducted during the IT boom.
• Determine project management trends during and after the IT boom & bust cycle, to establish future directions.

Survey Overview

Of the top 100 Australian organisations surveyed using a 32 question survey designed and created by the team at EQuest Consulting, responses from 40 organisations via direct interviews were compiled to provide the basis for the survey results. This paper will present EQuest Consulting's findings and provide an insight into the 2004 Australian IT Project Management Landscape.

Market sectors surveyed:

• Financial Services
• Telecommunications
• Retail
• Manufacturing
• Professional Services
• IT Vendors
• Services
• Government

Focus Areas:

• Company Project Demographics
• Project Performance
• Project Outsourcing
• Project Management Capability Maturity
• Project Manager Competency & Education
• Project Management Office
• Project Tools & Methodology
• Project Portfolio Management

Then and now: Findings of Prior Surveys

From the Standish Group's CHAOS Reports on Project Management

The Standish Group CHAOS Reports have, since 1994, served as a solid body of international research in the IT community. Their research focus on IT projects and the analysis they provide on project management is well regarded and often quoted. We have utilised the Standish Group Reports as a benchmark to make comparisons with our own research and findings in this survey. As the depth of research of the Standish Group Reports spans over 10 years it allows us to compare past progress with current trends.

1994

The large failure rate of IT projects led to comparisons with the construction industry, which had better success rates.

IT project statistics

• 31% cancelled before completion.
• 16% completed on-time & on-budget.
• Average time overrun was 222% over original estimate.
• Average cost overrun was 189% over original estimate.
• Average of 61% of required features were delivered.

Top 3 reasons for IT project failure identified were

• Lack of user involvement.
• Incomplete and unstable requirements & specifications.
• Lack of executive support.

1999

Success rates had improved from 16% to 26%.

Project management was gaining traction in organisations:

• Adoption of standard project methodologies.
• Building enterprise level formal project management disciplines.
• The advent of the professional Project Manager.

Lessons learned:

• Potential for success is related to project size, project duration & team size – small projects are
• more likely to succeed.
• People & process have a greater effect on project outcome than technology - formal project management reduces risk.

However, despite good progress, troubled projects remained the norm, there was still a long way to go.

2001

Continued progress had been made:

• Average time overrun now 63% over original estimate (222% in 1995).
• Average cost overrun now 45% over original estimate (189% in 1995).
• Average of 67% of required features were delivered (61% in 1995).

The key reasons for increased success were:

• Smaller project size.
• Better tools to monitor progress.
• Better skilled Project Managers using better formal processes.

The 2004 Australian Project Management Landscape

Project Demographics – Project Size and Duration

Survey Findings

Organisations attempting to do more with less.

Large organisations are typically running many mid-sized, 3 to 6 month projects with small project teams. The average number of concurrent projects being run in large organisations at one time is 40. See graphs below forming Exhibit 1.

Exhibit 1 - Project Demographics

Trends during the previous business cycle

IT Boom (1999 to 2001)

• Large Programs such as GST(Goods and Services Tax), Y2K (Year 2000), CRM (Customer Relationship Management), ERP (Enterprise Resource Planning).
• Dot com activity.

IT Bust (2001 to 2003)

• Dramatic reduction in spend.
• Only “keeping the lights on”, regulatory & security projects approved.

Current Trends (2004) in Project Demographics (Post IT Bust)

Increased activity experienced, however not many large scale initiatives.

Focus on cutting costs by:

• Leveraging a maturing internet (financial services & airlines) & streamlining infrastructure (for example sales force automation).
• Trying to increase utilisation of staff who now work on multiple projects.

Project Performance – Schedule, Budget & Scope

Survey Findings

Strains in meeting project objectives exist.

As referenced in the graphs shown within Exhibit 2:

• In half of organisations surveyed over half of projects are delivered late.
• In one third of organisations surveyed over half of projects are delivered over budget.
• In one quarter of organisations surveyed the average project delivers under half of its scope.

Exhibit 2 - Project Performance

Trends during the previous business cycle

IT Boom (1999 to 2001)

Standish Group CHAOS reports indicated steady improvement in performance, but with need for more.

IT Bust (2001 to 2003)

Numbers, size & complexity of projects decreased rapidly so project performance was not the upper most issue.

Current Trends (2004) in Project Performance (Post IT Bust)

Current performance is less than satisfactory due to budget & resource constraints that remain from the IT bust. Moreover, given the increased business activity generating more business requirements, the resource constraints lead to time overrun & reduction in scope delivered and tight budgets lead to cost overrun.

Project Outsourcing

Survey Findings

Low uptake due to perceived risks.

Per the graphs shown in Exhibit 3, about 20% of organisations outsource projects offshore and about 30% outsource locally, mostly large IT build / development projects.

Exhibit 3 - Project Outsourcing

The low take up rate of outsourcing in Australia appears to be attributed to a high perceived amount of risk.

Perceived Risks:

• Schedule and cost over runs.
• Lack of quality.
• Lack of vendor processes & subsequent loss of control.
• Communication difficulties due to culture, language, time zones and little face to face contact.
• Misunderstanding of requirements.
• Contractual issues.
• Weak engagement management process.
• Misalignment of organisational processes & strategic objectives.
• Poor support, for example difficulty to replicate problems.

Mitigations:

Many organisations did not have strategies for mitigating outsourcing risks.

Those that did included:

• Fixed price & performance incentive contracts.
• Managing expectations of project stakeholders (that is accept the level of risk but communicate possible impacts).
• Appointing vendor managers.
• Breaking scope of outsourced work into smaller units.
• Quickly establishing rules for the working relationship.
• Holding regular reviews during requirements definition.

Trends during the previous business cycle

IT Boom (1999 to 2001)

Some Australian companies entered long term outsourcing deals locally.
Offshore IT outsourcing companies grew (particularly in India).

IT Bust (2001 to 2003)

Long term local outsourcing deals continued, costs & levels of service closely scrutinised.
Offshore IT outsourcing companies survived, probably due to a trend to cut costs.

Current trends (2004) in Outsourcing (Post IT Bust)

The vast majority are large IT build/development projects

Other less common work outsourced includes:

• Package implementations.
• Specific types of technology.
• Enhancements & minor changes.
• Full outsourcing of the IT function.

Current take up in Australia is slow, probably due to:

• Few large IT build / development projects.
• High perceived amount of risk.

For IT outsourcing to increase in Australian organisations more maturity is needed in order to contain perceived risks.

Project Management Capability Maturity

Survey Findings

There is desire for improvement.

Most organisations believe they have reached CMM® (Capability Maturity Model) level 2 and need to get to level 4, demonstrating a recognised need to mature. These findings are represented in Exhibit 4.

Exhibit 4 - Project Management Capability Maturity

The types of maturity improvement needed are varied, the most common cited were consistency of approach and Project Manager development.

The most frequent items cited for improvements:

• Consistent methodology.
• Project Manager skills & career path.
• Planning & estimating.
• Reporting.
• Resource utilisation management.
• Project prioritisation & governance.
• Senior management buy in.
• Business involvement.

Trends during the previous business cycle:

IT Boom (1999 to 2001)

Standish Group CHAOS reports indicated significant maturation.
Building of enterprise level formal project management disciplines.

IT Bust (2001 to 2003)

No investment in project management maturity.
Investments from IT boom allowed to dwindle or actively dismantled.

Current trends (2004) in Project Management Capability Maturity (Post IT Bust)

Most firms are struggling due to a lack of management commitment to a Project Management culture with tools and processes not integrated throughout the organisation.

There is a mis-alignment between business demands (short timeframes, increasing complexity) and capabilities (restricted budget, lack of project management maturity).

Project Manager Competency & Education

Survey Findings

There is a shortfall in Project Manager capability emerging.

Only 43% of organisations believed their Project Managers’ capabilities met the demands placed upon them.

Only 52% of organisations had established a career path for their Project Managers.

As noted in the graphs shown in Exhibit 5:

• Many Team Leads & Business Analysts now given formal Project Manager roles, often without the training.
• Shortfall in capability of Project Managers to meet the new complex demands.
• Organisations beginning to address this issue with training & mentoring.

Exhibit 5 - Project Manager Competency & Education

Trends during the previous business cycle:

IT Boom (1999 to 2001)

The advent of the professional Project Manager.

IT Bust (2001 to 2003)

Using Team Leads & Business Analysts to manage projects and save on costs. Many professional Project Managers out of work due to lack of activity.

Current trends (2004) in Project Manager Competency and Education (Post IT Bust)

Project Managers are now required to manage multiple small/medium sized projects concurrently with shared resources. Due to the shortfall in capability there is a need to establish a career path for Project Managers in most organisations.

Project Management Office (PMO)

Survey Findings

PMO effectiveness lags project demands.

Exhibit 6 shows the range of services offered by PMOs within the surveyed group.

Exhibit 6 - Project Management Office (PMO)

A PMO that meets the needs of the organisation exists in only about one half of organisations.

There is little commonality between PMOs in different organisations, with the types of services provided varying widely.

• 74% of organisations had a PMO.
• Of these, 70% met the needs of the organisation.
• 80% of organisations carried out project health checks, post implementation reviews or project management audits, the PMO ran these in about 50%.

Trends during the previous business cycle:

IT Boom (1999 to 2001)

Standish Group CHAOS reports indicted most organisations established Project and Programme Offices to manage the large projects & programmes of the time.

IT Bust (2001 to 2003)

No longer any need for centralised PMOs.

Some were disbanded and some were cut back and moved into Business Units to handle compliance & maintenance issues.

Current trends (2004) in PMO (Post IT Bust)

Low level of effective PMO usage and little standardisation in organisations. As portfolio sizes increase there will be a need to re-establish centralised PMOs.

Project Tools & Methodology

Survey Findings

There is significant room for improvement.

86% of organisations’ project management methodologies are based on a recognised standard, such as the Guide to the Project Management Body of Knowledge (PMBOK®Guide) or PRINCE2 ™ however, only 55% of organisations responded that their project management methodology is followed successfully.

As depicted in Exhibit 7A:

• All organisations use a project scheduling tool, predominantly Microsoft ®Project.
• There is significant room for take up of portfolio management tools.

Exhibit 7A - Project Tools & Methodology

Exhibit 7B shows us:

• One in three organisations do not use reporting tools, one in three do not use cost tracking tools and one in five do not use risk & issue management tools, indicating significant room for maturity.
• Microsoft® Excel is widely used as a low cost tool for risk & issue management, cost tracking and reporting.

Exhibit 7B - Project Tools & Methodology

Trends during the previous business cycle:

IT Boom (1999 to 2001)

Per Standish Group CHAOS reports:

Use of project management tools to monitor progress became widespread.

Adoption of standard project methodologies.

IT Bust (1999 to 2003)

Microsoft® Project retained as a low cost scheduling tool.

No investment in new project management tools, use of spreadsheets.

Use of methodologies not enforced as projects were generally small scale.

Current trends (2004) in Tools & Methodology (Post IT Bust)

Closer scrutiny of the investment portfolio, combined with increasing business demands, is likely to drive the need for portfolio management tools.

Methodologies are not utilised effectively; with increasing project activity and multi project environments with shared resources, this will need to be addressed.

Project Portfolio Management

Survey Findings

There is a need to align with the view from the top.

Per the statistic listed in Exhibit 8 we find that Australian organisations are less mature at managing a portfolio of projects than at managing individual projects.

Exhibit 8 - Project Portfolio Management

Trends during the previous business cycle:

IT Boom (1999 to 2001)

Per Standish Group CHAOS reports:

Although the management of projects matured, the management of the portfolio remained immature as less
emphasis was placed on analysing investments.

IT Bust (2001 to 2003)

Investment portfolio cut back, so still little need for portfolio management.

Current trends (2004) in Portfolio Management (Post IT Bust)

Increased scrutiny of investment approval & alignment with strategy is likely to drive maturity of portfolio management.

Due to the increased scrutiny of investment decisions, Benefits Realisation has emerged as a new concept, so far with limited adoption, but also likely to mature.

Project Management Trends – A Final Summary

Trends during the previous business cycle:

IT Boom (1999 to 2001)

During the IT boom, the Standish Group CHAOS reports showed an increasing project success rate due to continual improvements in the practice of project management. We say solid levels of investment in project management to tackle high project failure rate. Excellent progress made but there was still room for improvement.

IT Bust (2001 to 2003)

Investment in project management practically zero due to severe cut back in IT spend.

Current trends 2004 Post IT Bust

But now, in the Australian IT Project Landscape 2004 survey, we see a fragmented landscape:

• High proportion of projects late, over budget & with scope not delivered.
• Most organisations do not rate themselves highly in project management maturity, although there is a recognised need to improve.
• Half of the surveyed organisations have an effective PMO, half do not.
• Project management tools are used widely for scheduling, but not for controlling other important project aspects such as risks & cost.
• Methodologies are based on a standard but only half are used effectively.

So has the practice of IT Project Management in Australia gone backwards since the IT boom? Could this be due to a reduction in investment in Project Management infrastructure to cut costs?

Remnants of project management infrastructure established in the IT boom remain, but capability has taken a backward step in the IT bust.

The post IT bust project environment that is emerging is more demanding & more complex than ever.

Reasons for project failures in the IT boom have not been forgotten, with organisations beginning to refocus on project management capabilities to meet increasing demands.

Project Management: The emerging landscape

The multi-project environment is more complex than ever:

• Project Managers manage multiple concurrent projects.
• Projects compete for limited resources.
• Resources shared between multiple projects and their line jobs.
• Integrated IT systems mean more project inter-dependencies and project deliverables impacting multiple Business Units.
• More scrutiny of IT investment.
• Business Owners with high expectations.
• Emerging need to manage a portfolio of projects which compete for investment & which must align with strategy.

Exhibit 9 shows us that Business Activity and Project Management Capability follow each other closely with Project Management capability lagging slightly behind. With lessons learnt from the IT boom and cutbacks in the IT bust, organisations must now get ready for the project management challenges ahead, in order to meet demands from increased business activity in today's complex multi-project environment.

Exhibit 9 - Project Management: The emerging landscape

Acknowledgements

This survey is the result of a significant investment of time and intellectual property on behalf of our valued clients. EQuest Consulting thanks all participants for their valued contributions to our research.

We would like to thank the staff and directors at EQuest Consulting Pty Ltd, North Sydney, Australia, www.eqc.com.au for commissioning the Survey and contributing to the collection, analysis and presentation of the results.

We would like to thank iGATE Global Solutions, North Sydney, Australia, www.igate.com for their contribution in relation to the survey which allowed it to be commissioned and completed.

• PMBOK® Guide is a registered Trade Mark of the Project Management Institute Inc. in the United States and/or other nations.
• PRINCE2™ is a Trade Mark of the Office of Government Commerce in Australia, Benelux Countries, Canada.
• Microsoft, Microsoft Project, Microsoft Excel, Microsoft Access, Microsoft Word are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries.
• CMM is registered in the U.S. Patent and Trademark Office by Carnegie Mellon University.
• PlanView™ is a registered trademark of PlanView Inc.
• Niku™ is a registered trademark of Niku Corporation in the United States and certain other countries.
• Open Workbench™ is a trademark of Niku Corporation in the United States and certain other countries.
• PMW refers to Project Managers Workbench which is related to Open Workbench an open source project scheduling tool.
• Primavera® is a registered trademark of Primavera Systems, Inc.

All other trademarks, trade names, company names and/or product names are used solely for the purpose of identification and are the property of their respective owners.