—by John S. Webster
Better project data often translates to better decisions. By using project management software coupled with enterprise resource planning (ERP) processes, organizations can update data more frequently—sometimes in real time—during a project life cycle. The result is better communication between various departments involved with the project, and these measures ultimately lead to cost savings and identifiable increases in overall project value.
It's not easy to find the places in the ERP process that can be improved, and it gets even more difficult—and perhaps more important—in larger enterprises, where change occurs slowly. “Large companies can't be reactive or proactive enough when technology changes so rapidly, and it may take five years just to implement an ERP system—there may be two or three generations of software during that time,” says Raymond Piper, PMP, president of Houston, Texas, USA-based Business Improvement Solutions Ltd. Co. “Then, you can't always connect project management software directly to ERP software, and ERP doesn't do much in terms of transferring data across the organization. First, you need the linkages, electronic data interfaces, EDI's, to link the software to the ERP system.”
Project management software is becoming more tightly integrated with enterprise resource planning systems at organizations of every size.
As large ERP vendors add communications functionality to their software, project managers are scrutinizing the relationships and flow of information between ERP and project management systems.
This synergistic approach has produced improved workflow, greater accuracy in reporting and accounting, better allocation of project resources, and cost savings.
Project managers and planners also must determine who has access to project data and resource information. An accountant might not need access to the same resources that a project manager or a human resources manager does.
“ERP systems can use separate data silos for each module, although some modules might interconnect to maximize the full benefit from the ERP system. But it's not cost-effective if some data silos are implemented but not used often, or at all,” Mr. Piper says.
On the Move
Considering their large potential user base, ERP software vendors are rushing to expand their software into project-based settings and sell additional software into existing accounts. Over the last two years, ERP software vendors such as PeopleSoft and SAP began to include project portfolio management (PPM) features with their offerings. In 2002, PeopleSoft also added analytics, program management and proposal management features. The back-office connections differentiate ERP modules from project-management specific software.
ERP systems can use separate data silos for each module, although some modules might interconnect to maximize the full benefit from the ERP system.
Raymond Piper, PMP, President, Business Improvement Solutions Ltd. Co., Houston, Texas, USA
ERP vendors offer this increased project management functionality because professional service and internal project organizations want increased project visibility. Visibility helps organizations control risk and maximize value of project investments, according to Paul Hamerman, an analyst at Forrester Research Inc., Cambridge, Mass., USA.
In addition, tighter integration between project management and ERP processes, especially human resource and financial management systems, improves decision-support analysis. As project-based business models become more common across industries, project management is central to more organizations, Mr. Hamerman reports.
ERP and project management software exchange data at different points, depending on the industry, company size and project goals. Project resources differ company to company, and departments involved in an IT project vary from those used by a construction firm. Whatever the industry, project managers should be able to evaluate several key project characteristics at any stage of the project, says Matt Light, an analyst at Stamford, Conn., USA-based Gartner Inc.
“Hopefully, you have the ability to not just analyze your project resources around the company, but to also plan, schedule and track those resources and tasks,” Mr. Light says. “Of those, the main touch point between project management software and ERP occurs during tracking.”
For example, a project manager looking at the progress on a construction project might track personnel and cost information as it moves into human resources and accounting modules of the ERP system, which in turn connects to back office systems, he says.
At Montréal, Québec, Canada-based Ericsson Research Canada, project managers must view, track and analyze far more detailed project data than financial staffers. Personnel in each area must have access to the information they need, while at the same time keeping the information current, says Eduardo Miranda, an Ericsson program manager and author of Running the Successful Hi-Tech Project Office (Artech, 2003).
“The level of detail in a typical project might have between 200 and 300 tasks, and that's what the project manager looks at,” Mr. Miranda says. “On the other hand, finance people are looking at data for invoicing purposes and cost control, which is not as detailed. They look at the project level and they maybe have four or five subprojects within that.”
When analyzing and tracking project data, leaders need real-time access to project information any time during the project life cycle. Project planners need to establish connections between ERP systems and project management software. Useful conventions include single-point data entry and process-based synchronization or sharing of the data across multiple systems.
“The quality of the project depends on the ability to access the same data in different places,” says Darren Jerome, managing director of Canadian operations at Rob-bins-Gioia LLC, a project-management consulting firm based in Alexandria, Va., USA. “This may be due to internal resources [people] that become available.”
When Québec-based Ericsson Research Canada Inc. deployed a project server two years ago, leaders could finally track time spent on project tasks down to the lowest-level element in the work break-down structure (WBS). But the finance department, which uses enterprise resource planning software for invoicing and budget control, didn't need to see such detailed time reports to process invoices.
“As these systems are not integrated, the question became which data—that of the ERP system or that of the project server—do you use to capture the number of hours worked on a project?” says Eduardo Miranda.
To resolve the conflict, the company developed a special time-sheet procedure. Rather than replicating the entire project WBS for finance—a time-consuming and overly complex process—the company assigned a unique charge number, provided by the finance department for each project that was later used to tag each task in it. Project workers report task hours using the server's time sheet, and the company developed a custom interface that summarizes weekly task hours for each project under the assigned charge number.
This solution helped to eliminate delays and over- or under-spending on project tasks. Project managers, who have greater visibility provided by the reporting of time at the task level, can react faster when actuals do not conform to the plan. This can be remedied “before small problems become big problems,” Mr. Miranda says.
Further, because the detailed project tracking offered by the project server forces managers to assign resources to the tasks so they can report the time worked, “this has resulted in a virtuous cycle of better plans and allocations as managers see the plan as a living instrument and not something that becomes obsolete the moment it is published,” Mr. Miranda says.
For example, the right person in the company might become available to replace a contract worker, and that's always cheaper. “If I hire five consultants at $100,000 each for three months, compared to using an internal resource that might get freed up during this particular task, even if the price difference is one or two percent, that's a substantial amount of money,” Mr. Jerome says.
Project managers have to define the work breakdown structure so creative resources aren't overmanaged.
Patricia Ensworth, Project Management Instructor, American Management Association, New York, N.Y., USA
In another example, an IT project manager needs to hire two XML programmers who can work between October and December, with a budget that falls between $40,000 and $50,000. This information also should be available through the ERP system to the human resources department and payroll to make sure the contract workers are in the system. This becomes even more crucial with volatile personnel data that might change by the day at a large organization, Mr. Jerome says.
By the same token, human resources data is continuously updated. People get married and change their names, move to new addresses, get salary raises and promotions, and earn security status upgrades. If one percent of human resources data is updated during the day at a 10,000-person company, 100 people will have new information. “A department at a government agency can have 10,000 people in it. If one percent of the resources are inaccurate during the course of the day [if it gets updated overnight], that means a lot for a large organization,” Mr. Jerome says.
The interaction of human resources departments and project management staff can be complicated, especially when creative workers and knowledge workers—project resources that work on research and development, for example—can't always produce results according to a rigid schedule. With these workers, project managers have to balance meeting a schedule and giving creative talent breathing room to do their jobs, says Patricia Ensworth, author of The Accidental Project Manager: Surviving the Transition from Techie to Manager (Wiley, 2001) and a project management instructor for the American Management Association, New York, N.Y., USA.
“Project managers have to define the work breakdown structure so creative resources aren't overmanaged,” she says. “By the same token, ERP administrators need to envision that knowledge workers can't perform on cue.”
This can become more sensitive at a global company, even leading to political struggles between project offices and the department that drives the ERP system. The question boils down to, “Who's going to run the show?” Ms. Ensworth says.
Other project-based organizations move project resource data between a corporate human resources database (which is not an ERP module), project management software and payroll-specific ERP software. In the case of Siemens, project managers use project management software for tracking and planning.
“Manpower planning figures are aggregated on a monthly and departmental basis and then exported to the costing database, where they are used to provide project budgets for manpower,” says Ingrid Kraemer, coordinator in the project management office at Siemens AG in Munich, Germany. “After the project planning process between IT staffers and project managers is complete, project data resides in the planning and tracking database.”
For projects including a digital electronic switching system for Bell South Corp. and long-haul networks for AT&T, the company used project management software in conjunction with its own human resources database and budgeting database, which contains project and department data. IT and project management staff must ensure that project and budgeting data are mapped at a very low level of granularity, Ms. Kraemer says. This was no easy task: The company had to develop its own “mapping generator,” but the effort has paid off, Ms. Kraemer says.
The project database itself has provided long-term overviews of labor capacity requirements and the ability to simulate capacity needs for different planning scenarios, all based on data in the project database. In addition, project managers already have the data they need for the fiscal year planning sessions in the system, so they do not need to produce and collate Excel sheets.
Organizations that analyze and improve the flow of project information to all affected—whether it's payroll, human resources, or upper management for semi-annual review—will see value increases in several areas. The most obvious are in IT and business planning, allocation and utilization of resources, and project visibility, Mr. Light says.
“By making sure certain projects have ‘priority purpose,’ IT will be more aligned with business goals,” he says. “Resources can be allocated according to availability of the guy or gal working on the task. And projects can be remedied or terminated more accurately and efficiently when you can track progress and compare it against project plans. For example, if you find that you've only completed 20 percent of planned work, and you've consumed 50 percent of the budget, you'll likely go 2.5 times over budget without a ‘course correction.' If you can tell that a project has made too little progress, you can kill it,” Mr. Light says.
Whatever the benefits of close scrutiny of ERP systems as they share data with project management software, the trend is toward tighter integration and establishing easier connections between the two applications. Even when an organization implements ERP and project management software at separate times, XML-based functionality is becoming a requirement for tech-savvy organizations. PM
John S. Webster is a freelance business writer based in Providence, R.I., USA.
PM NETWORK | OCTOBER 2004 | WWW.PMI.ORG
OCTOBER 2004 | PM NETWORK