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ERP for project-focused
By Henk Jan Onstwedder, Managing Director, Deltek Benelux
Many s...
ERP for Project-Focused Organizations
Added value
Traditional company information systems are primaril...
ERP for Project-Focused Organizations
Special challenges
In exceptional circumstances, such as today’s...
Deltek,Inc. 13880DullesCornerLane,HerndonVA20171 US&Canada800.456.2009 UK+44(0)2075185010AUS+618 81121...
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ERP For Project Focused Organizations


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ERP for Project focused organizations

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ERP For Project Focused Organizations

  1. 1. deltek.com1 Article ERP for project-focused organizations By Henk Jan Onstwedder, Managing Director, Deltek Benelux Many service provider organizations that carry out projects still have problems with the allocation of people and resources across project and line activities. People are loaded more than one hundred percent because the organization cannot manage to make up-to-the-minute information available by department, subsidiary or country. At the same time there is no real-time view of costs and progress. This is a way of working which is obviously unsatisfactory for companies which run many different projects with employees with different backgrounds, and who need to be drawn from different parts of the company. An integrated project and resource planning tool is therefore a ‘must’, if a project-focused organization wants to be successful. Software support can help here. In 2010 the Aberdeen Group published the results of research1 into the success factors for projects in the professional services sector. The research organization interviewed representatives of 315 organizations about their project results and to what extent they make use of project management software. On the basis of the results of that research, the Aberdeen Group identified a number of characteristics of those organizations which performed above average in the area of projects. These ‘best in class’ organizations succeeded in delivering 91 percent of projects on-time or earlier, and completed 96 percent of projects within budget. For the projects which were not completed within budget, the average overrun was seven percent. These organizations also saw an annual increase of 37 percent in the profitability of their projects. 1 Delivering Project Profitability, on time and under budget, Cindy Jutras, Nuris Ismail, 2010. Success factors The Aberdeen Group researchers found that almost three quarters of the successful organizations used software to integrate project and resource planning. For 57 percent of these organizations these solutions had been shifted from the desktop (read: Excel) to the level of the organization as a whole. In addition, 53 percent of the organizations had themselves defined and documented best practices for project management. These figures show therefore that there is added value to be gained from using a company-wide application for planning, scheduling, management and reporting and cost- price calculation. And that is exactly the scope of Enterprise Resource Planning (ERP) for project-focused organizations.
  2. 2. deltek.com2 Article ERP for Project-Focused Organizations Added value Traditional company information systems are primarily focused on the organization’s production and logistics activities, which work with physical products. Software systems are used to support such areas as production planning, routing of raw materials, semi-finished goods and finished goods, bill of materials and MRP calculations for materials requirements. These solutions are much less suitable for supporting project-driven organizations in their project management. Therefore, over the last few years, systems have come onto the market which are specifically developed for this sector with comparable functionality to support the whole project cycle. Examples of this functionality are: support for project structures (WBS), project budgeting, time and cost registration, determining WIP positions for projects and project and resource planning which are fully integrated with the financial management of the organization. Integration potentially adds value at each stage of a project, and starts at the client acquisition stage. Every project organization knows the importance of good budgeting when bidding. But there are few organizations that make use of the knowledge that they gained previously in this area. An ERP system specifically for project support helps here, by making previous budgets and actual data available. In addition it is an excellent tool for creating precise and realistic budgets. Implementation In many companies there is a clear split between the acquisition and the implementation of a project. In many cases the finance department has to create a project after it is acquired, before staff can book time and costs to it. In some organizations, days, and sometimes even weeks, are lost here. This is both undesirable and unnecessary, because with an integrated system it can be done quite literally with one press of a button. All information has already been collected and described anyway during the client acquisition process, so it is simple to convert it to a concrete project plan, including its budget, project phases and other relevant data. This not only saves time, but also reduces the risk of error which is inevitably involved in non-integrated information systems. Indissoluble links Integration with resource planning is another important part of an ERP system for project organizations. Projects stand or fall depending on enough availability of the right employees at the right time. Correctly allocating the right people to a large number of project paths is a complex puzzle and if you do not solve this puzzle correctly it can cost an organization a lot of money. An increase in the average utilization rate of just one percent, in a company with one hundred billable employees, will very quickly add up to an increase in turnover of at least one hundred thousand euros. With no change in costs, then the same effect can be expected in the earnings before tax. The impact of resource planning goes further still. The project manager also knows at all times whether there are enough people available to carry out the project as agreed. He or she therefore will not suddenly be surprised that too little progress has been booked as a result of there not being enough people. And if the schedule shows that extra capacity is needed, then the resource planning outcome will suggest which other employees are actually available. Project planning cannot manage without resource planning and vice versa. It is not possible to create a good resource plan without knowing which activities an organization needs to carry out in which projects. And a company cannot create good activity plans if it does not know whether employees of the right caliber are available in order to carry out the schedule. The availability of a resource planning module within ERP provides the information needed here.
  3. 3. deltek.com3 Article ERP for Project-Focused Organizations Special challenges In exceptional circumstances, such as today’s economic climate, the need for a project management ERP is reinforced even more strongly. Margins are under pressure, so that professional service vendors need to be even more careful in their project implementation. Small margins leave too little room for errors. In this kind of situation it matters for an organization whether it is constantly up to date with the current financial situation in each of its projects. Providing up-to-date information This example can be taken further. One effect of today’s economicclimateisthereducedavailabilityofcredit.Thismakes it all themoreimportantfororganizationstowatchtheirworking capital closely. In the case of projects based on actual costs, havinganup-to-dateviewofthehoursworkedandcostsincurred is essential for quick and accurate invoicing of customers. An ERP system ensures there is a direct link between these hours and costs and customer billing. In a project on a fixed- price basis, normally completion of a given project phase means you can bill the customer. Without an ERP solution, a project manager has to expressly inform the finance department when each of these milestones is reached. With an ERP solution, this is managed by the employees on the project themselves on the basis of progress reports. When all the activities for a phase are complete, the project manager is sent a message that an invoice can be sent and a workflow then ensures that the finance department is informed. Pressures Actions Capabilities Enablers • More competition • Lower prices • Lower margins • Definition and implementation of a standard project methodology based on best practices • Investment in technology support for projects • Project management and project implementation are integrated and coordinated with customer service and delivery organization • Business development and project managers work together on realistic customer expectations • Decision-makers are kept informed of progress in real time and can intervene immediately in the event of disruptions • real-time insight into all costs • Continuous monitoring of customer satisfaction • Project planning • Project management and reporting • Project cost calculations • Tools for cooperative working tools • Bidding process • Contract management • Workflow-automation • Sub-contractor management • Document management • Change management and control • Service management PACE Framework: Consistent overview of possible actions and potential advantages of employing technology to raise project activities to a higher level. Source: Aberdeen Group, 2010
  4. 4. deltek.com4 Article Deltek,Inc. 13880DullesCornerLane,HerndonVA20171 US&Canada800.456.2009 UK+44(0)2075185010AUS+618 81121200 ©2011 Deltek, Inc. • All Rights Reserved • All referenced trademarks are the property of their respective owners. Pricing subject to change without notice. 071111-v1 Deltek (Nasdaq: PROJ) is the leading global provider of enterprise software and information solutions for professional services firms and government contractors. For decades, we have delivered actionable insight that empowers our customers to unlock their business potential. Over 14,500 organizations and 1.8 million users in approximately 80 countries around the world rely on Deltek to research and identify opportunities, win new business, optimize resources, streamline operations, and deliver more profitable projects. Deltek – Know more. Do more.® Framework Will anERPsystemspecificallydesignedforprojectorganizations make you perfect? No, but it is definitely a big step in the right direction. It makes project information visible and ensures that the right information is available to make decisions in good time. It helps to define all the information once and for all and provides reporting to the interested parties. It is a necessary, but not the only, prerequisite for success. In the research report mentioned above from Aberdeen Group, the research company presents a framework for organizations who want to move their project activities to a higher level. This PACE framework (see table) offers a consistent overview of possible actions and the potential advantages of employing technology. Focus and awareness To create a project organization that performs optimally, focus and awareness are essential. Therefore it is always necessary to formulate clear goals and to ensure awareness of planning and resources. This is a challenge in particular for larger organizations, in that here often people work on their own turf, where local managers focus only on local results. With a global ERP system this can be prevented. An ERP system specifically designed for project-focused organizations helps organizations to take swifter decisions on the basis of real data and control information. It makes waiting to see how a project went, and whether you actually made money from it, a thing of the past. Real-time insight into projects replaces that and brings with it the best chances for a successful project. This article was originally published in Projectie. Tijdschrift voor Projectmanagement, January/February 2011; The Netherlands About the Author HenkJanOnstwedderisManagingDirectorofDeltekBenelux, anddeveloper and vendor of integrated software for the professional services industry.