Whitepaper

Project Management Office

sqs.com

PMO as a strategic success factor for project-based organisations

Abstract
Project-management-based organisations with either large
or numerous projects can profit from a range of benefits by
establishing a Project Management Office (PMO). Having a
PMO in place can increase efficiency and effectiveness within
projects as well as the maturity of Project Management.

PMOs can support project-oriented organisations at different

levels and across project boundaries, reduce the required
resources and increase the information transfer from project
to project. This whitepaper will introduce three different
approaches standard, extended and state-of-the-art PMO
and list their preconditions, advantages and disadvantages.

Author:
Samuel Mischler

Head of Application Development

SQS Software Quality Systems AG
[email protected]
Published: October 2012

SQS the worlds leading specialist in software quality

Whitepaper | Project Management Office

Contents
1.

Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1. Organising Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2. PMO and Efficiency/Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. PMO and Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2.

Defining PMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3.

Market Current Status and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

4.

Projects: The Current Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.

Standard PMO as of Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

6.

Extended PMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

7.

State-of-the-Art PMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

8.

Conclusion and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

9.

Bibliographical References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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1. Management Summary
These days, projects tend to differ regarding their scope,
budget, timeframe, etc., but if you take a closer look at how
they are organised, they dont actually differ that much. Over
the last few decades, the way project management has been
approached has dramatically changed, but the way projects
are organised has merely been adapted to potential political
changes concerning surrounding organisations.

1.1.

Organising Projects

While within project management optimisation has taken place

on different levels (moving away from Waterfall to Agile or from
basic project schedules to standards such as the PMBOK), the
processes and related organisational structures pertaining to
projects have never been updated to current needs in a similar
way. The main reason for this may be that a project, whether
IT-based or not, usually has a rather short lifetime of six months
up to three years maximum. Once a project and process maturity
model has been taken on board and best-practice gathering is
established and institutionalised, the optimisation of project
management within a company usually stops. Roles and responsibilities are defined, documents and templates established.
Maturity-based models promising to increase the efficiency and
effectiveness of projects are currently in vogue. Depending on
the size of the organisation, a large number of employees must
be trained to raise its maturity, new roles have to be initiated
and authority to be adopted. Each role must be trained, new
templates and guidelines have to be introduced and enforced
(depending on the specific maturity model and its integration),
and finally the processes to be institutionalised need to be
introduced, trained and assessed.
The usual approach is to train all the employees, introduce
all the templates, documents and guidelines, and all the
processes for all the roles. Depending on the size of the
company or organisational unit, this approach consumes a
considerable amount of resources (i.a. time, staff, procedures,
and consultants). The business case generally requires a longterm perspective and regular upgrades as well as training of all
employees due to changes in templates, processes and so on.

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1.2. PMO and Efficiency/Effectiveness

Irrespective of methodology, the set-up for projects will be
the same from one project to the next, and it depends on the
managements requirements.
The greatest influence on effectiveness and efficiency, however,
is to be found at the level of the Project Management Office
(PMO). Only small organisational units or portfolios are aware
of dependencies between projects, or of the parallel development
of the same product multiple times (same thing, different names).
Having a PMO in place not only reduces the required resources
(e.g. one PMO/QAP/CM/RM/TM/Tester dealing with several
projects rather than just one), it also increases the information
transfer from project to project and from portfolio to portfolio,
thus preventing parallel development and redundancies.

1.3. PMO and Maturity

The crucial question for the management is the following:
Is there no easy way to increase maturity within the Project
Management of a company or an organisational unit? Is it
always necessary to train and involve everyone in order to
raise the maturity level? And if not, how can the experience
of more mature organisational units be leveraged for the entire
company?
The PMO approach might be the answer to these questions.
Establishing a State-of-the-Art PMO will allow a company to
train only the PMO staff (for instance, three persons like a
Quality Manager, a Requirements Manager, and a Test Manager)
rather than the entire project staff within the required timeframe
in order to enhance or establish maturity according to e.g.
CMMI V1.2 ML2.
The result will be the same (maturity level reached), but the
costs will differ considerably (up to 70% less).

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2. Defining PMO
The definition of the term PMO is as follows:

The PMO (Project Management Office) is an organisational unit to centralise and coordinate Project Management
activities. The PMO ensures project management excellence within an organisation.
Delimitation: A Project Manager can hand over all tasks to the PMO, but not the responsibility.
Definition 1: PMO

3. Market Current Status and Outlook

Cost savings and a reduction of overhead costs are part of the
daily business for project-oriented organisations. Overhead
costs can easily be cut by 20% with an in-depth review and
a suitable approach (Plowman, 2012). Best practices show
that a holistic review taking the organisational approach into
account will yield the best results, not only with regard to the
persistence of the savings but also concerning the acceptance
of the related organisational units and roles.
An empirical study carried out at a large enterprise in the
financial industry indicated that the roles of
Project Manager
Quality Manager
Test Manager
Tester
Requirements Manager

All in all, the introduction of a state-of-the-art PMO allows for

cutting project costs by around 10% while at the same time
achieving better delivery quality and fewer errors in production,
a leaner people management for the entire company, leaner
organisation, faster time-to-market, higher maturity, and
invaluable profits such as improved knowledge management,
better collaboration, and employees with higher productivity.
The ten largest financial companies (SQS, 2011) generate an
overall IT budget of more than 15 billion, the IT project part
being about 50% or approximately 8 billion. With regard to
the estimation on this company acting as a single global player
in the financial industry, the result is as follows (see Figures 1
and 2):
Size of the global project portfolio (IT only):
approx. 8 billion/year
Estimated savings through introducing state-of-the-art PMOs:
approx. 1.1 billion/year

Solution Engineer / Architect

Business Project Manager and
PMO

The long-term leverage of a state-of-the-art PMO is impressive,

and the side effects are an additional argument to institutionalise
such PMOs for every company having a project portfolio.

were responsible for 25.2% of the project costs. After optimising

the programmes organisational structure, these costs were
reduced to 11.8% in other words, cut down by more than
50% per project.

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Whitepaper | Project Management Office

8,000
8,000

Budgets
Savings

6,000
4,000
2,016

2,000
0

896
Project
Portfolio Size

Overhead

Costs of PMO

1,120
403
Savings with Classic
Measurements

Possible
PMO-savings

Figure 1: Savings of a state-of-the-art PMO ()

100

100.0
Costs in %
Savings in %

80
60
40

25.2

20
0

11.2
Project
Portfolio Size

Overhead

Costs of PMO

14.0

5.0
Savings with Classic
Measurements

Possible
PMO-savings

Figure 2: Savings of a state-of-the-art PMO (%)

The overall IT project budget for all industries amounts to more

than 1,000 billion. In other words: savings of over 250
billion are possible if state-of-the-art PMOs are established.
Currently, the service industry is not responding to this demand
and no company is offering a PMO service. There are several
reasons for this:

Missing awareness of the possibilities

No know-how available on the market
Projects are being used to have a PMO,
instead of the other way round
Missing awareness of alternative approaches
The outlook will be extremely positive if the opportunity is taken.

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4. Projects: The Current Situation

Projects are generally set up in the same way (see Figure 3).
The Project Manager leads a designing group consisting of
Architects and Requirements Managers, a developing group
including some configuration experts, and a quality assurance
group, usually staffed with Testers as well. Often, the projects
report directly to the Portfolio Management.

Project Manager
Quality
Assurance

Design/RE

Realisation

In the light of these challenges, the international project

management community in the late 1990s and early 2000s
initiated the PMO model: a management layer introduced
between the Project and the Portfolio Management. The
scope of the PMO layer is to provide training and support,
control projects and streamline project reporting. While this
PMO function was introduced in the Anglo-American region
as designed, in most European countries the PMO approach
was only adopted for administrative usage. In Europe, the PMO
function resembles a personal assistance function focused on
organising meetings, rooms, etc. Therefore, the PMO has been
positioned as reporting to the Project Manager (see Figure 4).

Project Manager

Test

Figure 3: Basic set-up for a project

If project management is not the daily business of a company,

this approach makes sense and should not be changed. But for
companies where project management forms a large part of
their business, or even companies using project management
as their main approach, this set-up allocates too many similar
resources to identical tasks that are executed over and over
again. Since these resources conduct their tasks simultaneously,
the allocation of a large number of resources is required and
a large Knowledge Management system must be maintained.
As those projects are mostly decentralised, their controlling
(i.a. financials, goals, reporting, and decision-taking) poses
quite a challenge and coordination of the collaboration between
projects is difficult as well.

Quality
Assurance

Design/RE

PMO

Realisation

Test

Figure 4: Basic set-up for a project with a PMO

Even in this European set-up, benefits can be realised:

PMO established as an organisational unit
Raised awareness
Some of the internal processes/reporting may be
established
However, the disadvantages of this approach limit the PMO to
the extent that it is unable to provide any further added value
(i.a. costs, efficiency, and effectiveness).

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5. Standard PMO as of Today

The full scope of a PMO as specified in the definition comprises:
Support planning
Support of project controlling
Support of project reporting

The above-mentioned tasks and this type of organisational

structure do support projects within a portfolio and/or a
programme as well as a standing organisation. The set-up
allows leveraging of standard processes in Project Management,
such as stakeholder management, reporting, controlling,
planning, and resource management.

Ensuring reporting to the relevant stakeholders

Escalation to and coordination with the upper
management level
Review and controlling of the Stakeholder Management
Portfolio management of related projects

This standard PMO approach ensures an effective way to run

a PMO. Moreover, it supports the minimum level of maturity
for basic project management functions like i.a. reporting and
planning.
The advantages of this approach are the following:

Support of Resource Management

Enhanced quality of project management deliverables

Support of project management

Reduced project risks due to standardised reporting (KPIs)

Support of issue and action item management

Increased efficiency

Support of process maturity

Increased effectiveness

The reporting line runs from the projects to the PMO (see
Figure 5).

Reduction of redundancies (1 PMO for several projects)

Common services provided to different projects
Standardised project management deliverables
Standardised internal processes and procedures
The preconditions for this set-up clearly are:
Authority for PMO required
PMO process framework to be established
Roles and responsibilities for PMO required

Portfolio/Programme
Management

Project 1

Project 2

Project 3

PMO

Figure 5: Organisational set-up supported by a PMO

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6. Extended PMO
Once a standard PMO for projects has been established, the
latter can be standardised more and more. Maturity models
like CMMI based on PMBOK or PRINCE2 require the projects
compliance in all aspects. This is just one of the tasks normally
assigned to Project Managers.
In order to support the Project Managers, the PMO is assigned
the ensurance of compliance. Therefore, the PMOs responsibilities have to be extended (see Figure 6).

The following core activities have to be ensured by the PMO:

Multi-Project Controlling & Reporting according to defined
internal standards (incl. CAPEX and bookkeeping)
PM Quality Assurance, i.e. planning for quality assurance
and testing
Project Portfolio Management
The supporting activities are as follows:
PM Standards Development & Facilitation: PMO provides
input to develop internal PM standards and provides all PM
tools required

PM Quality
Assurance
Multi-Project
Controlling &
Reporting

Project
Portfolio
Management
Project
Coaching &
PM Training

PM Standards
Development &
Facilitation

Knowledge
Broker &
Information
Platform

PM Software
Support

Project Coaching & PM Training: PMO trains Project

Managers and project members with regard to PM standards
Project Portfolio Management: PMO ensures organisation-/
portfolio-wide Knowledge Management and interdisciplinary
exchange of lessons learned, news, etc.
PM Software Support: PMO supports tools provided to the
entire team
To establish this Extended PMO approach, the following
organisational structure is recommended (see Figure 7).

Figure 6: Extended responsibilities of a PMO

Portfolio/Programme
Management

Project 1

Project 2

Project 3

PMO incl. QA

Figure 7: Organisational structure using an extended PMO

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This approach enables the leverage of common resources like

Quality Assurance and the PMO, ensures backup for Project
Managers (they can be replaced by the PMO for a certain time),
and establishes a common Project Management environment.
In addition, Portfolio Management may also be included.
This extended PMO approach is perfectly suited to establish
the institutionalisation of project maturity through PMOs. The
advantages of this approach are as follows:
Significant increase in quality of all project deliverables due
to overall Project and Quality Management planning
Reduced redundant functions (1 PMO/1 Quality Manager
for all projects)

Reduced project risks due to standardised QA and PM

reporting (KPIs)
Standardised Stakeholder Management
Increased efficiency
Increased effectiveness
Common services and resources provided to different
projects
Extended standardised project management deliverables
Extended standardised internal processes/procedures
Introduction and institutionalisation of capability maturity
level models supported

Knowledge Management enabled

A disadvantage of this approach is the following:

Interfaces within the organisation documented and

communicated

Introduction of standard PMO required

7. State-of-the-Art PMO
The tendency to leverage a PMO to the greatest possible extent
is constantly rising. In order to understand this approach, it

Init./Set-up

Analysis

Design

may help to take a look at project life cycles, in this case based
on the example of a waterfall model (see Figure 8).

Realisation

Deployment

Figure 8: Deliverables in a project

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During a project life cycle (irrespective of which project approach

is being followed), project deliverables are established by
different roles for different project sequences (see Figure 9).

Init./Set-up

Analysis

These (intermediate) project deliverables are not within the

scope of the PMO.

Design

Realisation

Deployment

Incorporation, tools, common project management deliverables and roles in the project

Project Logistics

Figure 9: PMO as logistic layer for the projects

Some of the project management deliverables and some of

the project roles persist over the entire project life cycle.
Therefore, it is strongly recommended to evaluate these
persistent roles and project management deliverables, and
to hand them over to the PMO.

PMO

Within a project portfolio, the different projects usually are at

different stages in their life cycles. For this reason, resources
like the PMO, Quality Assurance, and also Requirements and
Test Management, are used at different levels and to varying
degrees. Instead of allocating those resources independently to
each project (and having them sitting on the bench for some
time during a project phase), centralisation of those resources
ensures maximum of productivity for each project and for the
entire portfolio with regard to those resources. This kind of
pooling for common resources within the portfolio (see Figure
10) has a number of role candidates:

Tester

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Quality Manager
Requirements Manager
Test Manager

Depending on the project scope (e.g. one holistic scope for

an entire portfolio), the following roles may also be formally
attached to the PMO:
Architecture (i.a. system, data, and network)
Business Project Manager
Any other common role

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Including Requirements and Test Management in the scope has

additional advantages. Well-defined requirements result directly
in improved test cases; consequently, sharing one resource for

both process areas is not only possible but depending on the

maturity of the individuals and/or internal processes also
feasible.

Portfolio/Programme
Management

Project 1

Project 2

Project 3

PMO incl. QA/

RE/Testing

Figure 10: Organisational structure of projects using a state-of-the-art PMO approach

This approach also requires an advanced technical maturity, for

instance involving the use of common planning and reporting
platforms (e.g. MS Project Server or equivalent, repositories),
since the assignment and confirmation of resources for the
projects must be transparent. The basis for this approach is
provided by the extended PMO services.

The preconditions for this approach are as follows:

Support of top management required (maturity level of
Project Management needs to be raised to widen scope)
Introduction of standard PMO required
Technical skills of PMO staff to be trained

The state-of-the-art PMO has the following advantages:

Significant increase in overall quality and overall scope,
resource, project and quality management planning,
including testing and deployment (depending on scope)
Significant reduction of redundancies (Requirements
Management and Test Management may be merged)
Knowledge Management fostered due to regular exchanges
with Project Managers and different roles within the PMO
Reduced project risks due to standardised KPIs from
Requirements to Testing
Defined, established and communicated escalation paths
Portfolio Management included for free
Project Manager is no success factor any more (eliminated
hero effect)

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8. Conclusion and Outlook

Having well-trained, certified Project Managers as well as a
high-maturity-level Project Management at its disposal will
help any enterprise succeed. But the greatest benefit an
organisation may profit from is a state-of-the-art PMO.
The introduction of a PMO has a significant impact on a
project-management-based organisation or organisational units
with either large or numerous projects, i.a. with regard to the
following:
Increase in maturity of Project Management
Increase in efficiency and effectiveness within projects
Reduction of redundant tasks and roles
Reduction of training effort
Pooling of resources enabled
Reduction of risks due to the larger interaction between
projects
Reduction of defects in production due to larger portfolios
and EED due to larger testing scope (within a portfolio rather
than project by project)
Increase in transparency due to standardised KPIs
Increase in tools integrated into project organisation
Reduction of time-to-market
Interdisciplinary Knowledge Management (knowledge
brokerage)

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The reduction of the Project Management overhead (Vaughan,

2009) from the international benchmark of around 16% of the
project budget down to 8% within large projects is another
reason to establish state-of-the-art PMOs within the organisation.
A PMO cannot replace a Project Manager, but PMOs can
support project-oriented organisations at different levels and
across project boundaries.
Introducing a state-of-the-art PMO requires specific know-how,
and this missing know-how is the main reason why PMOs have
not yet been implemented on a large scale. As there is no
common approach to learning or any training for such a highlevel PMO, allocating the required resources is a critical issue.
But once this know-how is available it is an excellent business
opportunity with a considerable leverage factor.
Under the holistic approach of Quality Assurance, SQS provides
PMO services. On the basis of an innovation group, the definition,
the training, and the rollout of this service is ensured. The prime
client for such a PMO has been SQS itself: the first of these PMOs
was successfully established within the software department of
SQS AG. With the experience gained, the defined services, and
the training of the specific resources, SQS is in a position to
provide a consistent QA from the health check of an organisation
over the start of a project (portfolio) and collaboration in projects
right up to the testing of the final products irrespective of the
approach the customer has chosen (whether it be Waterfall,
Agile, or another).

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9. Bibliographical References
Plowman, Brian. Managing Overhead Costs. Managers-Net. [Online]. [Cited: 2012.]
http://www.managers-net.com/plowman/managingoverheadcosts.html.
SQS AG. Internal Report: Holistic Overview of IT Budgets of the 10 Largest Financial Companies. Cologne: 2011.
Vaughan, Jim. Project Management is NOT Overhead! CIO. [Online] 20/09/2009. [Cited: 2012.]
http://advice.cio.com/jim_vaughan/project_management_is_not_overhead.

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