The Hackett Group: Most Companies with Project Management Offices See Higher
IT Costs, No Performance Improvements
Research Details Factors Behind the Failure of PMOs as an IT Strategy At
Typical Companies, While Also Spotlighting Key Practices that Enable
World-Class IT Organizations to Use PMOs to Generate Superior Results
MIAMI & LONDON -- November 01, 2012
Project Management Offices (PMOs) fail to help most companies reduce IT cost
or improve performance, according to new research from The Hackett Group, Inc.
(NASDAQ:HCKT). In fact, companies with high utilization of PMOs see materially
higher IT costs while also failing to deliver projects with higher ROI or
better on-time and on-budget performance, according to the research. The
research also found that companies have significantly reduced their use of
PMOs over the past three years, in part due to their inability to positively
The Hackett Group's research details the flaws that cause traditional PMOs to
fail as an IT strategy, and also provides insights into the key PMO practices
of world-class IT organizations, which rely on PMOs almost universally and
generate superior results, including cost reduction and improved IT
"Since the recession, many companies have simply given up on PMOs. And with
good reason," said The Hackett Group IT Advisory Practice Leader John Reeves.
"The way most companies implement PMOs, they have become large bureaucratic
organizations with myopic viewpoints. Too often they focus on practices that
simply create a drag on the organization, facilitate design weaknesses,
increase complexity and drive up maintenance and support costs. It's a shame,
because the paradox is that our research also shows that when used properly,
PMOs can be exceptionally effective at driving quality and reducing
complexity. That's why they're a key best practice at virtually every
world-class IT organization we've studied."
The Hackett Group's analysis, which is based on a review of IT metrics from
in-depth benchmarks conducted at more than 200 large global companies over the
past two years, debunks the common misconception that PMOs reduce costs. In
fact, companies with high PMO usage see the opposite trend. While not all the
cost increase is necessarily attributed to PMO utilization, The Hackett
Group's research finds that behaviors associated with PMOs at typical
companies become pervasive and drive materially higher IT costs. A key part of
this is operating costs. The Hackett Group's research found that companies
with low PMO utilization actually see 32 percent lower operating costs than
companies with high PMO utilization.
The study also found that high PMO utilization did not drive better business
outcomes or project delivery performance. Companies with high PMO usage showed
virtually identical ability to deliver projects on-time or on-budget. They
also showed virtually identical ability to achieve anticipated benefits,
achieve stated ROI targets, and deliver to specifications.
PMO usage has been on the decline since 2009, the study also found. The
percent of infrastructure projects managed by PMOs has dropped by over 20
percent, while its use for application projects has dropped by nearly 18
percent. Overall, only 53 percent of all IT projects are currently managed by
PMOs, down nearly 12 percent points since 2009. The size of PMOs has also been
shrinking, according to The Hackett Group's study, with the average number of
FTEs dedicated to PMO activities falling by 41 percent from 2009 to 2011. On a
relative basis, FTEs dedicated to PMO activities dropped from 6% of total IT
staff in 2009 to just 2% in 2011.
Meanwhile, The Hackett Group's research showed that companies with world-class
IT organizations, which operate at 15 percent lower costs and higher
effectiveness levels than typical companies, rely heavily on PMOs and use them
for over 95 percent of application development and infrastructure projects.
The research also identified the four key practices that world-class IT
organizations rely on to enable them to reverse the trend seen by typical
companies and use PMOs to improve IT efficiency and effectiveness. These are:
centralized IT demand management; accountability for business benefits;
standardization of processes and architecture; and program and project
reviews. These practices enable world-class IT organizations to effectively
utilize PMOs to drive IT complexity reduction, improve ROI, and more
frequently deliver projects on time and on budget.
"These four practices are the key to propelling a PMO forward, and generating
real results in terms of reducing IT complexity, better business outcomes, and
improved project delivery performance," said The Hackett Group Principal and
Global IT Transformation Practice Leader Rich Pople. "Their impact cannot be
overstated, and world-class IT organizations understand that.
"For example, companies which show high utilization of centralized demand
management practices are able to deliver projects that meet specifications,
achieve anticipated benefits, and achieve their ROI targets four times more
often than those with little or no demand management," said Mr. Pople. "At the
same time these companies are also 63 percent more likely to deliver projects
on time and on budget. It's tough to argue with results like that."
About The Hackett Group
The Hackett Group (NASDAQ: HCKT), a global strategic business advisory and
operations improvement consulting firm, is a leader in best practice advisory,
business benchmarking, and transformation consulting services including
strategy and operations, working capital management, and globalization advice.
Utilizing best practices and implementation insights from more than 7,500
benchmarking studies, executives use The Hackett Group's empirically-based
approach to quickly define and implement initiatives that enable world-class
performance. Through its REL group, The Hackett Group offers working capital
solutions focused on delivering significant cash flow improvements. Through
its Archstone Consulting group, The Hackett Group offers Strategy & Operations
consulting services in the Consumer and Industrial Products, Pharmaceutical,
Manufacturing, and Financial Services industry sectors. Through its Hackett
Technology Solutions group, The Hackett Group offers business application
consulting services that help maximize returns on IT investments. The Hackett
Group has completed benchmark studies with over 2,800 major corporations and
government agencies, including 97% of the Dow Jones Industrials, 86% of the
Fortune 100, 90% of the DAX 30 and 48% of the FTSE 100.
More information on The Hackett Group is available: by phone at (770)
225-7300; by e-mail at email@example.com.
The Hackett Group, Inc.
Gary Baker, 917-796-2391
Global Communications Director
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