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The Hackett Group: Most Companies With Project Management Offices See Higher IT Costs, No Performance Improvements

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 impact performance.

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 effectiveness.

"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.

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