Project Partners Blog

To accomplish a successful business transformation project, experience, drawn from numerous projects over the years, has shown a pattern that is worth incorporating into every project. Successful projects establish a program framework and implementation approach that addresses the following critical success factors:

• Executive Sponsorship:  The project should strive to develop a productive relationship with the Executive Sponsors that encourages active participation in the project rather than a group that receives monthly status updates. The Executive Sponsors can be the greatest asset to a team and the most effective change agents if given the opportunity. Utilizing an effective decision making framework that facilitates timely decisions is a key component to leveraging the Executive Sponsor participation.

• Project Team Structure: The project needs resources that are perceived by their organizations as thought leaders. Many times staffing decisions are made based on availability and not necessarily on the candidates’ qualifications. Because of the importance of the project to the future of the business, there needs to be a priority given to staffing the project with the right resources.

If this is done:

• The ability of the end solution to meet the business needs is enhanced
• The organization has ready acceptance and confidence in the solution
• The time to develop the solution will decrease, which reduces the risks and cost of the project
• Business process changes will be sustained after the implementation is completed

• Rollout Strategy – A rapid and aggressive roll out strategy allows the project to develop wins and demonstrate benefits early. This will help facilitate a smooth rollout and cultivate a group of supportive users early.

• Change Management Program – As program complexity and reach increases so does the risk of not realizing the expected business benefits. Most organizations are resistant to change.

• Training Program – Firms often underestimate the amount of training required for successful transformation. How your firm certifies core system competencies and readiness will help reassure the users and their management that they are ready for go-live.

• Quality Solution - Many times clients have hired us after a failed implementation. The major contributor is often incomplete design or severe technical issues that had been overlooked during the testing process. The most successful approach to any business transformation project is to take a process focus to solving the business need and to view the technology as the enabler of the process. Focus on implementing end-to-end processes that are complete and meet the stated business objectives.Employ a rigorous iterative testing process to ensure that the solution will work effectively in a production environment prior to the implementation. Leverages these testing events to accomplish several key objectives: process validation, project team education, quality assurance and solution acceptance.

• Technical Support – Many projects with fewer complexities have failed or missed deadlines because of technical issues either at the infrastructure or application layer. Use a methodology that is process oriented. Technical competency as part of the team is a core strength you must have. Partner with the different technology vendors to ensure that their solution works and when it doesn’t, work closely with them to resolve the issue.

As your organization prepares to spend significant money on new tools to help you better manage projects, how prepared are you to achieve a return on this investment?   Bradford K. Clark confirms a 15% to 21% improvement in project execution and delivery costs in a 1997 study done at the University of Southern California by moving the project management maturity level up one level. William Ibbs, UC Berkley, confirms similar results in consulting and engineering firms.

Professional Services Automation empowers the Professional Services organization by providing a set of enhanced, automated and integrated capabilities to set-up, manage, control and report on client engagements.  The span of PSA includes the initial opportunity identification, through the proposal and planning processes, staffing and executing the work, collection of costs, recognition of revenue, invoicing the client, knowledge management and collaboration with both the internal team and the client representatives.  PSA provides a single end-to-end, scalable system to manage the professional services business. This allows for growth of the business, reduces response time during the sales cycle, allows the PMO to foster innovation and increases quality of projects, better management of consulting employees and subcontractor resources, and integrates intellectual capital management with the delivery of professional services.

There are four success measures for your PSA implementation: Revenue Production, Productivity Enhancement, Risk Reduction and Improved Cycle Times.  In all cases these should be valid measurement criteria to determine success and measure the ROI of your investment.  As you prepare to implement new tools for your organization, consider establishment of a baseline across your firm.  Assess where the organization is before you begin.  Leverage this knowledge to help focus change management and training efforts where the return will be greatest. Build a business case with specific targets and ROI measures.  Develop a plan to move your organization up the project management maturity level, implementing only functions and features needed for success. Plan training programs to increase the understanding and skills of your Project Management team, not just in the tools, but in application of the tools to better manage your projects.  Enable additional features and functions as your project management team matures.

Key Performance Indicators (KPI) can assist in assessing the present state of the business and to prescribe a course of action.  Real-time monitoring of KPI’s allows maximization of performance over the shortest time period.  Oracle Project Management provides hundreds of KPI measurements for utilization by your team.  Remember to be SMART in your use of these important tools:

Specific  Measurable  Achievable  Realistic  Timely

Plan on updating the maturity measurement of your organization on a regular basis to determine where you have been successful in your improvement and identify areas of opportunity for future improvement.

The Engineering, Procure, Construct (EPC) industry, in general, has struggled for years to find solutions that would enable integrated operation across the enterprise.  Manufacturing firms found several software vendors developing innovative solutions that allow the planning of material purchases, scheduling of shop floor activities and management of the distribution and logistic process all in a single integrated system that allowed enterprise level reporting and drill down to the underlying transactions that support detail analysis.  Part of this was due to pure numbers, with thousands of companies to purchase MRP and ERP systems, but only hundreds of larger firms to purchase EPC systems.  Niche players developed to fill certain gaps and larger firms developed in house custom applications to support their business.

With the evolution of ERP systems, the major EPC players have started to see solutions that are being developed for the professional services industry, which can be directly used for much of the engineering and design activities found within an EPC firm.  One area that the ERP packages have not addressed well involve the move from historic “standard cost” models used in manufacturing to the “actual cost” model used in some engineering and design work and most construction work.  Systems, such as JD Edwards, have offered an integrated solution between the ledger and payroll systems that allowed penetration into the smaller EPC firms but still relied on other niche and point solutions to provide the complete needs across the enterprise.  By building so much functionality into the GL database, firms with a large number of projects or the need to provide detail job costing ran into conflicts with the financial reporting needs of the firm since there was no sub ledger to off load the detail.  Other niche firms, like Deltek, developed a comprehensive solution for smaller firms doing business with the Federal government but were not practical for most commercial applications.  Firms like Niku and MPower targeted specific project driven needs and built solutions that did a fine job of meeting that specific problem, but did not integrate well into the enterprise view. Other firms, like SAP, sought to build “integrated solutions” by designing in certain aspects of the project management function but ran afoul of the large firm need for very powerful project management tools, such as Primavera, that were beyond the capacity they could reasonable afford to design in.

As engineering systems moved from the drafting board to the computer, systems were evolving greater ability to speed up design by defining various recurring equipment and design elements and relating these elements to specific purchased items.  This allowed the development of automated take-off capability and creation of purchasing systems that were integrated to the design elements and take-off lists.  While this made the procurement process more efficient for some types of projects, such as heavy industrial, it did nothing for civil and less “item” intensive projects.  Other point solutions were developed to aid these industries.  Intergraph and other design tool companies developed solutions to fill specific gaps, such as Marian.  Project management companies either built out additional offerings, such as Expedition from Primavera, or were acquired like Niku did with ABT or Primavera did with TeamPlay. Various niche players developed project-estimating tools, such as MC2 (MC squared) and others developed collaboration and document management solutions like Documentum and ERoom.  Companies, like Meridian, have built up solutions such as Proliance, Prolog and Project Talk for the industry.

As all these various solutions started to appear on the market, EPC, APC, E&C firms were besieged with solutions that did not integrate, did not fill all their needs, were feature poor, plagued with problems and expensive to implement and maintain.  Many of these problems were driven by the segmented nature of the industry and lack of critical mass to fund development and improve the solutions.  As a result, the same large firms are shown as satisfied users of multiple competing systems designed to meet the same need.

In the last 2-3 years, Oracle Corporation has started to expand the Oracle ERP applications into solutions that can better be utilized in the E&C space.  As is true with all the various companies that have offered products in the past, the Oracle Applications have significant gaps that need to still be met by other solutions or custom development.  One of the primary drivers behind the acceptance Oracle is finding in the E&C market is less how well it meets the specific needs of the industry and more the feature rich functionality it offers firms that have been struggling with limited user base and integration as business expands, companies merge and government regulation reaches deeper into the company.

Historically, consulting firms did not find much traction in the E&C industry. Solutions were fragmented and it was difficult to develop critical mass to support a consulting group.  As a result many solution companies either helped customers implement their software or clients were forced to self-implement using internal teams that were sent off to training.  With the sudden up turn in Oracle activity within the E&C industry, a new model has started to appear. Because Oracle has been widely used across manufacturing firms and has thousands of clients across international firms, a significant consultant base exists across the world.  Most of these consultants have strong Oracle application knowledge, understand the complexity of multinational business transactions and the utilization of Oracle applications within a business process re-engineering implementation.  Very few consultants have truly worked across both the ERP and E&C environments.  Since several parts of the solution still require niche or point solutions, this creates a significant challenge for firms doing a true global integrated solution.  This is further compounded by pent up demand that is being met by a software solution that is marketed heavily by the solution company to justify continued development work for the industry.  In contrast to the historic model of implementation, the Oracle solution requires consulting assistance to leverage the true benefits and cost savings envisioned in the ROI model that are used to justify the expenditure.  With limited experienced resources across the ERP and E&C worlds and multiple companies seeking to do their implementation immediately, there is very high demand for a limited number of specialized individuals.  This is driving a need to team across consulting companies to meet the implementation challenges found in the E&C industry.

In the EPC and E&C world, very few firms can offer the complete set of services required to accomplish everything from initial design through final punch list sign off.  What matters most is the ability to bring together the right resources, at the right time, in the right place, to keep a project on track, on schedule and on cost.  With the entry of Oracle Applications significantly into the E&C space, this same model applies.

Large project based organizations working in a multi-national, multi-currency environment struggle with how best to deal with currency issues when managing projects and reporting project and organization financial performance.

When dealing with currencies in a project environment, the following types of currencies come into play:

1. Functional Currency: The currency in which the financial books are maintained
2. Contract Currency: The currency in which the contract for the project is written
3. Project Currency: The Currency in which the project is managed. This may be different from the functional currency and very often may even be the contract currency.
4. Cost Currency: The currencies in which cost is incurred.
5. Revenue Currency: The currency in which revenue is accrued, this very often is the functional currency in which the project is setup.
6. Invoice Currency: The currency in which the project is to be invoiced.
7. Reporting Currency: This is the one currency in which all financial information across all projects is consolidated for management reporting.

Project based organizations run the gamut on the maturity scale in dealing with currencies. Some organizations are taking the first steps in expanding beyond current national boundaries and the issues involved keep them within their current currency boundary and they tend to execute solely in their primary currency only. On the other end of the scale are experienced multi-nationals that execute projects requiring serious hedging of currencies in order to maintain their margins.

Today we will address organizations from the lower end of the scale to those somewhere in the middle. In order to execute and manage effectively, the following currency setups are suggested for projects:

1. Project Currency = Functional Currency: This removes 1 level of complexity from the project manager’s plate and allows them to manage the project without the additional burden of currency management.
2. The Contract and Invoice Currencies should be as specified by the client. This is something that is typically negotiable with the client to determine who incurs the currency risk, the project organization or the project client.
3. The Budget Currency should be the project/functional currency and all budget v/s actual variances should also be managed in the project currency. This makes the budgeting process easier.
4. Costs may be accrued in any currency and revenue should be incurred in the functional currency to keep things nice and simple.

In light of this setup, let’s tackle reporting at two levels: single project reporting and organizational reporting.

Single Project Reporting
Reporting for a project is primarily for project management purposes and hence all financial reporting for the project manager should be provided in the project/functional currency. As budgets and forecasts are also defined in the project/functional currency, it makes all variance reporting easy.

Organization Reporting
Reporting for project organizations is typically accomplished in the following currencies:

1. Functional Currency: This works well for organizations (and rollups) that are within a currency boundary.

2. Global Reporting Currency: This is a currency in which financial information is consolidated across currency boundaries for management reporting. This currency is typically set to the currency in which the organization maintains it’s primary or management offices.

Setup and Maintenance of Global Reporting Currency
1. As mentioned above, the functional currency of the organizations main office location should be setup as the global reporting currency for ease of management reporting.

2. Exchange rates for converting projects from other currencies to the Global Reporting currency should ideally be setup with

a. Conversion rates to the global reporting conversion should be setup as fixed rates for any given year. This allows management and project managers to measure the performance of the project without including variances due to currency fluctuations.

b. Conversion rates will also be needed for future months/years in order to convert budget and forecast amounts for projects. These future amounts should be refreshed yearly based on the latest rates at the end of a given fiscal year. This may require budget/forecast amounts to be reconverted to use the new rates.

Any variations from the management reporting numbers so derived will differ from the financial numbers from the official books due to exchange rate variances.

Following this simplified approach allows any project organization to expand into international arena while protecting their project managers and leaving the currency issues to experts in the finance organization.

That’s it for now and remember:

There is no better way to manage a business than to Manage by Project.

PS: I welcome all comments / trackbacks / pingbacks / queries to my nascent venture here. I will try and respond to your comments, etc in future entries.