The implementation of software for project, program and portfolio management (PPM) or more broadly, the implementation/improvement of project, program and portfolio management practices supported by PPM software, can be treated like any other business initiative that requires specific investments and is intended to deliver defined benefits to the organization within a given time horizon (e.g., within three years).

Improving the efficiency of portfolio, program and project management may be limited to the implementation of a PPM-class tool that automates the management practices already functioning in the organization and provides new capabilities resulting from the functionalities of such software. However, if the organization has not previously operated in this way, the initiative should also include other elements, such as the development/improvement of the methodology/processes for managing projects, programs and the project portfolio, as well as the enhancement of knowledge and competencies of the employees who execute and oversee projects. It is also important to provide support for the organization in managing the change, which is often not only technical in nature (new tool) but also very much human (new roles and responsibilities, new ways of working). All of this should be considered when defining the scope of the implementation project to maximize the likelihood of the organization achieving the expected effects.

DOWNLOAD THE SHEET TO CALCULATE THE ROI OF PPM SOFTWARE IMPLEMENTATION

Formula for ROI from Implementing PPM software

The return on investment (ROI) from implementing project, program and portfolio management software (either the software alone or, more broadly, including the increase in organizational maturity and team competencies) can be calculated using the standard ROI formula:

             

Benefits are understood as the revenues and savings the organization will gain as a result of utilizing the effects of the implementation. Expenses refer to the investment in purchasing and maintaining the PPM solution and potentially additional expenditures related to organizational change — such as developing or improving project, program and portfolio management methodologies/processes, upskilling staff and managing the overall change process.

However, the ROI indicator has its limitations. In particular, it does not take into account the cost of capital involved in the initiative or the time value of money. Therefore, to evaluate the profitability of implementing project, program and portfolio management software, discounted investment evaluation measures such as NPV, IRR or the discounted payback period can also be applied. In these approaches, benefits are treated as cash inflows and expenses as cash outflows. Additionally, all cash flows are discounted over time.

Regardless of the approach used, benefits and expenses will be identified in the same way — and it is precisely the identification of these components for calculating the return on investment from implementing project, program and portfolio management software (including any potential organizational changes) that will be the focus of the next part of this article.

While identifying benefits, it is important to keep in mind that, in addition to measurable financial results, such investments also generate numerous intangible effects, which should also be taken into consideration when assessing the overall viability of the initiative.

Benefits of iplementation

Typical areas where we can identify the benefits of implementing project, program, and portfolio management software (either the software alone or, more broadly, including enhancements to organizational maturity and team competencies) include:

  • reduction in the time and effort required for managing projects, programs, and the entire project portfolio,
  • increase in return on investment (ROI) in projects.

It is worth noting that while various PPM systems may appear similar, they often differ significantly in terms of more advanced functionalities, which tend to have the greatest impact on the benefits achieved. For instance, virtually every PPM software today supports the automatic update of schedules after changes to task deadlines or milestones. However, automatic forecasting of expenses and effects following changes in the timelines of related schedule items is still relatively rare. Anyone working on projects involving expenses or effects knows how much time such automation can save.

Below are examples of benefits, along with proposed ways to measure them, as part of reducing the time and effort required to manage projects, programs and the entire project portfolio:

1. Elimination of time-consuming manual project status reporting by the Project Manager

After implementing Hadrone PPM software, there is no longer a need for Project Managers to manually prepare project status reports (so-called "one-pagers") that describe schedule progress, budget performance and forecasts, actual and forecasted team workload, delivery of project effects, identified risks, open issues, etc. Since project teams work within the software on a daily basis, real-time data on project progress is available online to all stakeholders with the appropriate permissions in the system.

How to measure this?

Formula: Average time spent monthly by a Project Manager on preparing project status summaries × gross hourly rate of a Project Manager × number of active projects in the organization

Example: 2 hours × 200 PLN/hour × 50 projects = 20,000 PLN per month. When analyzing ROI over a 3-year period, the savings amount to 720,000 PLN.

2. Reduction of project administration effort by the Project Manager

Hadrone PPM automates part of the work that would otherwise have to be done manually by the Project Manager. Examples of automation include:

  • automatic recalculation of the entire project schedule (especially end dates and individual milestone dates) after updating task deadlines in the schedule, based on dependencies between schedule elements,
  • automatic forecasting of expense occurrence over time after changes in the project schedule, based on linking expenses to specific tasks or milestones,
  • automatic forecasting of effect realization over time following changes to the schedule, based on linking effects to specific tasks or milestones,
  • automatic calculation of project NPV, both baseline and estimated, taking into account timing shifts and changes in the value of expenses and effects,
  • automatic detection of outdated schedule elements and suggestions to the Project Manager regarding which elements require updates,
  • automatic reminders about upcoming milestone or task deadlines, as well as alerts regarding delays.

How to measure this?

Formula: Average weekly time savings on project status updates per Project Manager × 4 weeks per month × gross hourly rate of a Project Manager × number of active projects in the organization

Example: 4 hours/week × 4 weeks/month × 200 PLN/hour × 50 projects = 80,000 PLN per month. Over a 3-year ROI analysis horizon, this results in savings of 5,880,000 PLN.

3. Reduction of effort through automatic import of expenses and commitments from the Accounting System

After implementing Hadrone PPM together with integration with the accounting system and, optionally, the procurement system, information about project-related expenses (e.g. invoices for delivered services and materials) and financial commitments made within projects will be automatically visible within the project. As a result, Project Managers will no longer need to waste time switching between systems, searching for relevant financial data or maintaining their own version of the project budget in Excel in order to keep track of both supplier orders and actual expenses incurred in the project.

How to measure this?

Formula: Average monthly time spent by a Project Manager on collecting financial information from external sources × gross hourly rate of a Project Manager × number of active projects in the organization

Example: 2 hours × 200 PLN/hour × 50 projects = 20,000 PLN per month. Over a 3-year ROI analysis horizon, this results in savings of 720,000 PLN.

4. Reduction of effort related to project monitoring

After implementing Hadrone PPM, monitoring the status of projects becomes significantly less time-consuming. Data on deviations from baseline plans — in terms of deadlines, expenses, resources, and effects — is available online, with the ability to quickly identify projects where deviations are significant enough to require management action (e.g., schedule changes, budget adjustments, scope modifications, etc.). Thanks to the standardization of project progress reporting, time spent on monitoring is significantly reduced — there is no need to review each project in detail or organize frequent review meetings with Project Managers. Instead, attention is focused only on projects that are developing differently than planned, allowing time to be used effectively to understand deviations and minimize their negative impact.

How to measure this?

Formula: Average weekly time savings on project monitoring per person × 4 weeks per month × gross hourly rate of the person supervising projects × number of project supervisors

Example: 4 hours/week × 4 weeks/month × 200 PLN/hour × 2 people = 6,400 PLN per month. Over a 3-year ROI analysis horizon, this results in savings of 230,400 PLN.

The second group of benefits results from ensuring a higher return on investment in projects:

1. Better project ideas

Hadrone PPM supports the creation of a project portfolio that includes the most valuable initiatives and is feasible within defined financial and resource constraints by leveraging the following functionalities:

  • linking projects to strategic objectives,
  • automatically calculating the expected return on investment (planned NPV), based on estimated expenses and anticipated effects,
  • project prioritization using a scoring-based evaluation,
  • portfolio planning and balancing based on the availability of financial resources and human capital (skills and capacity).

How to measure this?

Conduct a historical analysis (e.g. for the past 3 years) or future projection (e.g. for the next 3 years) to estimate:

  • expenses saved on projects that were not initiated due to a lack of sufficient business justification,
  • increased revenues and other organizational benefits resulting from the execution of projects that are best aligned with the organization’s goals, needs and capabilities.

2. Maximizing benefits generated by projects

Hadrone PPM supports better decision-making in ongoing project portfolio management through:

  • online access to reliable, up-to-date information on the status of all projects,
  • early warnings about expected deviations from:
    • project completion dates,
    • milestone achievement deadlines,
    • planned project budgets,
    • planned project workload,
    • expected post-project effects,
  • insight into the impact of risks arising in projects on timelines, budgets and workload
  • automatic calculation of the forecasted return on investment (estimated NPV), including identification of projects whose business justification is at risk,
  • identification of resource bottlenecks (comparing skill availability with their allocation in projects) and assessment of the impact of skill shortages on project delays,
  • monitoring strategic execution (progress on strategic objectives, actual and forecasted KPI values) linked directly to ongoing projects.

How to measure this?

Conduct a historical analysis (e.g. for the past 3 years) or forecast analysis (e.g. for the next 3 years) to estimate:

  • additional revenues and savings generated by reducing project delays and minimizing budget overruns,
  • savings from discontinuing (or at least not expanding the budgets of) projects that have lost their business justification.

Implementation and maintenance expenses

Implementing PPM software involves both one-time costs and post-implementation support. When developing the business case for such an initiative, it is essential to analyze all sources of expenses — both external (e.g. supplier involvement) and internal (e.g. the engagement of internal teams and use of in-house IT infrastructure) — in order to properly compare available solutions.

As part of the expenses required for the implementation and ongoing maintenance of project, program and portfolio management software (either the software alone or, more broadly, including improvements in organizational maturity and team competencies), it is important to analyze and account for the following:

  • software licensing costs, including upgrades (new versions),
  • IT infrastructure costs,
  • supplier support costs related to software implementation,
  • supplier support costs related to software development/customization,
  • internal costs associated with the software implementation,
  • supplier support costs for organizational change management,
  • post-implementation support and maintenance costs.

Each of these expense categories is discussed below to assist in identifying their individual cost components.

1. Software licensing costs, including upgrades (new versions)

When purchasing software, we typically acquire not only the current version but also the right to receive future updates (commonly referred to as software assurance) released by the supplier within a defined period. These updates may include functional enhancements as well as technical changes, including those related to ensuring an appropriate level of software security.

Depending on the chosen deployment model — On-Premises or Cloud (SaaS) — the fee covers either a time-limited license or subscription-based access to the software hosted in the cloud. In the case of Hadrone PPM, both deployment options are available (On-Premises and SaaS) and access to new software versions (updates) is included in the price.

2. IT infrastructure costs

When using PPM software in the cloud (SaaS model), IT infrastructure costs are covered by the software provider and therefore do not need to be included in the cost analysis.

However, if the software suposed to be installed on the Client’s infrastructure (On-Premises model), the related infrastructure costs must be taken into account. Depending on the technologies used by the PPM software, the infrastructure may include:

  • physical or virtual servers,
  • database,
  • other middleware software.

Hadrone PPM uses standard IT infrastructure (Windows Server + MS SQL database) and does not require any additional third-party software license costs for middleware or platform components.

3. Supplier support costs for software implementation

Some Clients, after completing a pilot phase, feel confident enough with Hadrone PPM to implement the software independently — but they are in the minority.

The vast majority of Clients expect involvement from the Supplier or an implementation Partner to support the deployment and facilitate knowledge transfer, enabling them to later use and adapt the software on their own.

The scope of supplier support during implementation can vary significantly, which means the associated costs will also differ. For Hadrone PPM, the basic implementation support package typically includes:

  • assistance with software installation (On-Premises model) or cloud environment setup (SaaS model),
  • system analysis and configuration,
  • preparation of training materials,
  • delivery of training sessions for users.

Additional implementation services may include the migration of existing projects into the new system, the development of dedicated integrations with other systems (such as ERP or procurement platforms) or the design and implementation of a data warehouse, along with data feeding processes and customized reports and executive dashboards.

4. Costs of supplier support in software development

In the case of off-the-shelf software such as Hadrone PPM, these types of costs do not apply.

However, when it comes to platform-based solutions, it is necessary to account for the supplier’s effort related to customizing and developing the software to meet the client’s specific needs — both during the initial implementation and in the course of ongoing use.

With off-the-shelf software, the license fee typically includes access to all future software updates and versions (as is the case with Hadrone PPM). In contrast, with platform-based solutions, each change or new feature requires direct supplier involvement and incurs additional costs for designing, building and testing the enhancement.

Supplier support costs for the development of platform-based software often represent the largest share of the implementation budget, which is why they must be carefully analyzed and included in the overall calculation.

5. Costs of supplier support in organizational implementation

Implementing PPM software is not only a technical change but also an organizational one, affecting many stakeholders from various areas of the organization (executive management, business managers, project office, strategy, finance, investments, HR, IT, project managers, and project team members).

Without properly „embedding" the PPM software into the organization, its implementation may fail—the software will be „installed," but the organization will not see its value and, over time, will stop using it.

Therefore, during implementation, it is crucial to address the organizational and human aspects (communication, development/modification of project, program, and portfolio management methodology/processes, new roles, and responsibilities). If external support is required for this, the costs of such support should be included in the calculations.

6. Internal costs related to software implementation

The internal costs incurred by the Client, understood as the time spent by the Client’s team, will vary significantly depending on whether ready-made software or a platform solution has been chosen.

In the case of ready-made software (such as Hadrone PPM), the involvement of the Client’s team can be easily planned—it stems from the implementation method, which in our case is standardized and repeatable. Since the work with the Client’s team focuses on properly configuring the existing functionalities of the software, the required involvement of the client is often much smaller compared to the implementation of a platform solution.

In the latter case (platform software), the Client’s team is additionally engaged in analysis, design, and ultimately testing the delivered solution. These are often significant costs, which are also difficult to estimate precisely before the implementation.

7. Post-implementation support costs for software

Post-implementation support costs are typically optional and may include:

  • technical support (SLA),
  • substantive support for users,
  • other support, charged based on usage.

Technical support (SLA - Service Level Agreement) is designed to ensure that in the event of software failure or the discovery of security vulnerabilities, the supplier will correct the error or vulnerability within a specified time. The more critical the issue, the shorter the expected resolution time. Suppliers usually have a standard offering regarding response times and resolution times, based on the criticality of the software for the organization.

Substantive support for users does not concern technical matters but focuses on the functionality of the software. This support is particularly useful in the initial period after implementation when the organization is still learning the new solution and wants to ensure supplier support. This support can be billed based on the consultant's time or through a flat-rate fee. In the latter case, the client pays a fixed fee and within this arrangement can ask an unlimited number of substantive questions, which the supplier will answer without charging for the time spent.

Additionally, sometimes Clients secure a certain number of hours/days of the supplier’s consultant work for unforeseen needs, such as additional user training or support with integrations. This type of support is usually charged on a Time & Material basis, i.e., based on the actual time spent by the supplier at an agreed rate.

Depending on the organization's needs, a broader or narrower range of post-implementation support should be included in the return on investment calculations.

To facilitate the return on investment calculation for PPM software implementation, we have prepared a ready-made spreadsheet, which you can download below:

DOWNLOAD THE SHEET TO CALCULATE THE ROI OF PPM SOFTWARE IMPLEMENTATION