Is a project office suited for small/medium business

Introduction

After its original introduction in the defence and construction industries, where long-term, large-budget projects demanded a systematic and cohesive approach to project management and coordination., since about ten years IT organizations have adopted and tailored the Project Office concept to better “govern” their IT strategy and changes. However, we feel that the Project Office organization has not become a “milestone” in the IT Project Management practice yet. We believe that IT organizations’ current average Project Management maturity has been very influential in this. On the other hand, Project Management Maturity requires, amongst other things, proper organization, methods, professional competence and control.

Despite the fact that, in our experience, organizing and running a Project Office in IT organizations is not always as natural as it should be, even for large project driven and project dependant organizations, there is a sort of concern about the validity of such a strategy for small and medium ones. An accepted definition of Project Driven and Project Dependant organizations can be found in (Archibald, 2004).

The EEC act 2003/361/CE, issued on May 6^th 2003, has formally redefined micro, small and medium organizations. The previous definition, in place since 1996, had to be updated due to inflation, with related devaluation, and productive growth.

This paper discusses the current competitive requirements of Italian small and medium organizations in the global economy context, and attempts to show how an organized project office approach can be beneficial in this kind of context. The relevance of such approach to both AISoftw@re SpA and, as organized services, to clusters of small/medium Italian companies, will be discussed. AISoftw@re S.p.A. is an Italian medium IT services company, enlisted at the Milan new market stock exchange (MTAX). which has recently grown by acquisition, becoming a large IT services firm and chas hanged its name to EXPRIVIA. EXPRIVIA AISoftw@re's experience with project offices is also presented.

The Project Office

In the modern economy, managing projects has acquired a very central role due to a number of circumstances, such as the overstressing competitive asset, new business models, reduced margins, which have been amplified by the current market globalization trend with related complexity of multicultural approaches; or the demanding ever progressing technology and implied requirements (Gareis, 2000). In the author's opinion, the kind of Project Office approaches that have been adopted so far, do not seem to be mature yet and pose extra burdens on organizations, which require to be compensated by real business benefits. This is important for all business sizes: large, medium and small (Business Improvement Architects, 2005).

Ever since the Project Office organization was introduced in Information Technology departments to support the business related to Project Management, multiple definitions and meanings have been used:

Although some better understanding of these concepts is developing in the professional arena, we find an enormous confusion still.

At the beginning of its introduction in IT, the Project Office organization was successfully employed to support, temporarily and in a dedicated way, some very critical projects, e.g. Year 2000 ones or, in Europe, EURO conversion projects.

The Project Management Institute (PMI^®) has introduced such a concept in the 2000 edition of its main international standard reference on Project Management processes and related knowledge, A Guide to the Project Management Body of Knowledge (PMBOK^® Guide). In the 3^rd edition of PMBOK^® Guide (Project Management Institute 2004), which was issued on November 2004, more accurate definitions and characteristics were also supplied. The concepts of Program Management and Portfolio Management were introduced, which implied, also, a differentiation between Project Management Office and Program Management Office. PMBOK^® Guide 3^rd edition in its glossary section (p 369), defines the Project Management Office as: “an organizational body or entity assigned various responsibilities related to the centralized and coordinated management of those projects under its domain. The responsibilities of a PMO can range from providing project management support functions to actually being responsible for the direct management of a project”. In the same glossary section of PMBOK^® Guide 3^rd edition the Program Management Office is defined as: “The centralised management of a particular program or programs such that a corporate benefit is realised by the sharing of resources, methodologies, tools, and techniques, and related high-level project management focus”. PMBOK^® Guide uses the acronym PMO interchangeably for all of these definitions.

The PMBOK^® Guide suggests (pag. 17, 1.6.4) that “PMOs can operate on a continuum, from providing project management support functions in the form of training, software, standardised policies, and procedures, to actual direct management and responsibility for achieving the project objectives. A specific PMO can receive delegated authority to act as an integral stakeholder and a key decision-maker during the initiation stage of each project, can have the authority to make recommendations, or can terminate projects to keep the business objectives consistent. In addition, the PMO can be involved in the selection, management, and redeployment, if necessary, of shared project personnel and, where possible, dedicated project personnel.” Some of the features of PMOs, the PMBOK^® Guide suggests, include:

According to a recent on-line survey (Business Improvement Architects, 2005) conducted on “750 participants from around the globe who have either successfully or unsuccessfully implemented Project Management Offices:

Project Management for Medium and Small Organizations in Italy

Medium vs Small organizations

The EEC (European Economic Community) act 2003/361/CE, issued on May 6^th 2003, has formally redefined micro, small and medium organizations. The previous definition had to be updated due to inflation, with related devaluation, and productive growth, in place since 1996. The new definition has been effective since Jan. 1^st, 2005 and is very influential for the kind of support that EEC is going to allow to European firms, either individually or in clusters. EEC definitions for these kind of businesses are as follows:

Some expert (Cipolletta, 2005) claims that the size of an enterprise strongly depends on the size of its reference market, rather than just on number of employees or sales levels. This explains why some locally big enterprises might become small or medium ones in an international context. According to Innocenzo Cipolletta, president of UBS Corporate Finance Italia SpA, and former general manager of the Italian industry association (Confindustria), the size of an enterprise depends also on a few other characteristics, such as:

As a consequence, some organizations which could be considered small or medium ones from the number of employess and/or sales level standpoints, might be considered medium or large organizations on the base of other important characteristics, e.g.: good relation with its reference market, effective organization, very good R&D plans. Mr. Cipolletta claims that, nowadays, medium and small businesses require the same level of competence, professional attitude, organization and contacts, as for large enterprises.

The Italian industrial districts

In the eighties, after a major economical crisis, the Italian industry was able to recover competitiveness by means of very significant territorial concentrations of enterprises specializing in specific sectors, thus making possible local organization of entire production lines. Such concentrations are known as industrial districts. Particularly in the north of Italy, such districts are playing a very fundamental role. Their relevance in the less developed southern part of Italy has also been very evident. Exhibit 1 shows the number of Italian industrial districts by local areas (regions). Currently there are various identification criteria depending on the organization that performs such identification (regional authority, ISTAT, research institution such as Tagliacarne or Censis). Therefore the number varies depending on this. Lately, each local regional government has identified its official industrial districts. This is important for directions and support reasons.

Exhibit 1 - Number of Italian industrial districts by location and type of identification criteria

The Italian business in the Global economy

Following the Bretton Woods international agreements; the collapse of the communist regime in Russia; the Chinese liberal politics of the recent years; the adoption of the EEC common currency; the enlargement of the European Community from 9 members in 1973 to 25 members as of May 1^st 2004 and an internal market of about 450 million peoples as of 2005 end, more liberal market conditions are now in place globally. The contemporary development of ICT (Information and Communication Technology) technologies, combined with such liberal market assets, has stimulated strong market development and demanded for a consistent reorganization of the production activities, with a goal of both incorporating the technological progress, on the one side, and implementing complex production modules by means of outsourcing, tertiarization (Birkinshaw 2000) and de-localization, on the other side. As a consequence, interpersonal and inter-organizational relationships have showed a very significant development towards the so called “global-village”.

The market globalization, besides influencing the whole world economy for, approximately, the last 20 years, has recently produced many important transformations in the Italian economic and productive system. In such a contest the survival of the whole productive system depends on many critical issues. First of all the growth of everybody's competence to improve competition effectiveness, even in the case of “small” sized Italian organizations, which now need to properly select their (global) reference market and concentrate on it.

This new market-oriented approach must be efficient, ready to changes and capable of retaining high professional levels. Organizations need to continuously address changes from both the production point of view (what they produce) and the process point of view (how they operate). Such changes are no more impacting a single organization but rather they have important impacts on both the environment and the available collective resources. New topics that require answers are: needed skills and how to make them available; civil integration of immigrant workers; kind and priority of investments; delocalization government. It is required the growth of everybody's competence to improve competition effectiveness, even in the case of “small” sized Italian organizations, which now must properly select their (global) reference market and concentrate on it. Territorial organizations, such as the Italian industrial districts, even in the case of very well organized productions, are very weak managing structural changes in their conception, agreement and resource gathering. The importance of such factors has spawned a number of supporting programs by EEC, central and local Italian governments. The latter aim at facilitating the consolidation of both bigger enterprises (not just with respect to number of employees and level of sales - see above), and more modern services approaches. Among other things, project and program management is, therefore, becoming a key issue, even for small/medium organizations. Some initiatives are already in place to support this aspect. We are aware of the following ones: the regional government of Lazio (the region where Rome is located) has sponsored some interesting Project Management master programs for unemployed educated people; the region where I live is organizing a project management Service Centre for small- medium enterprises in the area.

Project Management in EXPRIVIA AISoftw@re

Background

Since recently Exprivia AISoftw@re is no longer a medium-sized company. Incorporation by merger of Abaco Information Services (Abaco I.S.) created an IT services firm listed on the Milan MTAX stock exchange, with about 650 employees and about 50M€ sales level. However, its Project Management strategy was mainly originated in Abaco I.S. as a consequence of the need to guarantee results and proper margins in the management of third part project initiatives. Such initiatives aimed at implementing specific subprojects in the area of ERP systems or other technological components for major projects. Abaco I.S. set-up its Project Office since early 2005, using the former experience of some new employees.

AISoftw@re's Project Office

Initially it was not sure that a proper project office would have been the right approach. However there were at least three aspects to cope with:

The initial nature of Abaco I.S. projects lead to the decision that a functional project management organization would have been more appropriated than the more modern matrix one. With the new EXPRIVIA AISoftw@re organization the project complexity has grown, and the project matrix organization has become more and more adopted. This is the case, e.g., of: large research projects and internal investment IT projects and programs. We adopted the following strategy:

1. Assess internal project management maturity
Although the initial state of the art with regard to Project Management was easily understandable, we spent some time investigating the current situation and the project management requirements for both internal project delivery and contracted ones. Some previous efforts had been done to introduce the Project Management processes and to train proper Project Managers. However, these efforts had given little return in terms of cultural growth and maturity. We found that there was a flaw coming from the approach that had been used. The processes had been defined in a way which gave not enough concern to some related project management assets, such as: project management organization (functional vs matrix or projectized); project manager's competences and career paths planning; flexibility in the project management processes which could cope with the type and complexity of the project management effort. Setting-up a Project management Support Office (PSO) would have corrected these anomalies by investing a proper organization for all was concerning the project management discipline set-up and evolution.

2. Establish a PSO (Project Support Office).
Together with top management, we established the Project Management strategy and goals. In coordination with the central Quality Assurance function, the project management processes and working tools were reviewed and redefined. These processes are in line with the PMBOK^® Guide ones. Our previous experience (Casanova, 2003) was useful to understand how the methodological framework had to be organized and sized for a medium organization as AISoftw@re was at the time.
In liaison with the Human Resources department, both the project management curriculum and a project management career plan were defined (see exhibit 3 below).

3. Start spreading the project management culture and working competence.
Proper training was organized and delivered both internally and by means of external PMI registered education providers (REP). In the first year, about 30 people have been internally trained with a basic course and related simulation training, where a proper project is to be handled under the instructor's supervision. The results have been excellent since many team managers or senior personnel have been introduced to the profession and the company's project management approach. Some of them have been given a chance to continue to the PMP^® certification training, giving excellent results too. Currently there are 7 PMP^® certified PMs and we have lost some of them who had other opportunities on the market. Fortunately this is a very small number.

Exhibit 2 – Project Management process flow in AISoftw@re

4. Keep control on projects and PM processes
Using a simple spreadsheet, a catalogue of active projects is managed which, for each project reports its characteristics, status, performance and other management information, such as review dates and review status. Reviews are made based on simple templates which reports on progress and open problems. Progress is basically expressed in terms of Earned Value Analysis. The final minutes of the review meeting reports any agreed actions and new planned dates. Regularly, the PSO supplies the Production manager with a report about the global project management situation and planned improvement actions.

Exhibit 3 – Project Management Curriculum

After about one year we can notice a few important returns particularly in the average cultural growth related to project management motivations and practise. Several research and contracted projects have been handled. In addition, some important investment projects and programs are being handled, particularly to cope with the business change related to the transition from a medium to a large enterprise and related merger. The role of the PSO, though not consolidated yet, has been central in this. As the project management maturity grows and projects become more and more inter-functional, a transition from PSO to PMO (Project Management Office) will be required, thus making the PMO responsible for the inter-functional management of projects and project managers, which is now demanded to one of the involved functions.

Project Management as a global competition factor in SMBs

Although small-medium businesses (SMB) have often different project management requirements from large organizations, as already discussed earlier, the current competitive asset in Italy pushes such kind of businesses to look for efficient ways to set-up fast competitive gaps with respect to the global business. Often, this consists in improving the nature and the automation of their business processes, besides the cooperation, inside specific industrial districts, along the production line. Many both innovation and change project initiatives, which require to be organized, supported and controlled, are being sponsored by both local authorities and the EEC, on this purpose. Moreover, the new conception of the size of a business based on potential characteristics rather than on actual revenues and number of employees and the ascertainment that medium and small businesses in the global competition context require the same level of competence, professional attitude, organization and contacts, as for large enterprises (Cipolletta, 2005) takes to the strong requirement of well organized consortia of SMBs which, other than sharing the efforts along the supply chain, can take advantage of common services. Setting-up and controlling a specific supply chain requires either innovation or change project/programs. In my opinion, this is a strategic goal that can only be addressed at the right level if a proper Project Office (temporary) organization is associated with the initiative, much as was the case of Year 2000 projects and other critical initiatives of the recent past. On average, the burden of a Project Office on single SMBs is difficult to bear. I am strongly convinced that Project Office services to share and control project management investments, as for other form of shared services, are a very important asset for single industrial districts or even for multiple, geographical spanned ones. I can already notice a trend to set-up common service centres in support of the productive aggregations of SMBs. And here in Italy I can see important signs that common Project Office services are going to be included in such service centres. Some how, the aggregation of various small/medium organizations to achieve a common projectized goal is stimulating the set-up of centralized PMO services.

Conclusions

The new economy, strongly affected by global markets, poses many important challenges to the Italian (and European) industry which is also in a very critical point of its history because of the EEC market enlargement. The average size of the Italian industry has shrank over time because of several situations and this required a proper strategy which led, among other things, to the so called industrial districts, which attempt to organize productive aggregations, such as supply chains, where each small organization can have a specific role along the chain. It is also more and more clear that such industrial districts, in order to be fit for the global market, need to be internationalized. New and very serious challenges are, therefore, set to the Italian industry with particular emphasis for the small-medium ones. The EEC has recently redefined the criteria for setting the size of an organization. However, besides number of employees and level of sales, in the global market the size of a competing organization depends on completely different factors, such as its market share and its capacity to compete. In such a context a small-medium organization requires the same level of competence, professional attitude, organization and contacts, as for large enterprises. A topic competition factor is the ability to continuously address changes from both the production point of view (what they produce) and the process point of view (how they operate). Project and program management is very crucial to implementing such strategy. Naturally this is not something that a single small/medium organization can normally address singularly. We are strongly convinced, and there are already some important signals that this is becoming an accepted point of view, that centralized Project Office supporting services is going to be more and more important for specific industrial districts or even amongst various ones. Ideally, this could be achieved by means of common services centers together with other kind of services. We believe that common Project Office processes could effectively contribute to solve the well-known problem of giving a “head” to a district, since such Project Office services could help improve both business and process governance: address strategic business issues by means of project/program portfolios for one of more industrial district; address, business, and process changes in a proper way, by means of common change programs; stimulate and share competence; organize and promote knowledge and component reuse.

Acknowledgments

I wish to thank all people who have given their contributions in the production and revision of this paper. In particular, I wish to thank Domenico Favuzzi who has made possible the writing of this paper.