PMI-FCCI Six Sector Study

8/7/2019 PMI-FCCI Six Sector Study

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p~~.P ro je ct Man ag emen t I n st it ut e

I A u t o m o b i l e I D e f e n c e I E n e r g y I In f r a s t r u c t u r e I I T - I T E S I R e a l E s t a t e I


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lilt must beconsidered thatthere is nothingmore difficult tocarry out nor moredoubtful of successnor moredangerous tohandle than toinitiate a new orderof things."- Machiavelli1446-1507, Italianstatesman andphilosopher

ForewordProjects are new beginnings in many ways. Whether it is the launch of a newcar or development of a new software, it needs planning, design, execution,and monitoring before the final product is delivered. Project management isthe science and art of sequencing and stringing all these activities togetherinto a coherent whole to ensure that the final delivery meets the desiredspecifications. Every complex project comes with its own problems andcha Ilenges, and good project ma nagement practices hel p overcome them.

Project management is like juggling three balls simultaneously as it involvesmaintaining a fine balance between delivering on time, within budget whileensuring quality. Examples of large and complex projects being delivered onall three parameters are few and far between. In India, for example,construction of the Delhi Metro Rail is considered to be one of the moresuccessful ventures. However, in general, the problem of time and costover-runs remains a common pain area in both public and private sectorprojects in India. Very few studies have investigated the relationship betweenapplication of good project management practices and successful projectdelivery, especially through comparisons across sectors and domains.

This study aims to fill the void in comparative studies on project management.By comparing project management practices across six key sectors, viz.automobile, defence, energy, infrastructure, IT-ITES and real estate, it seeksto determine whether there is a case for introducing improved projectmanagement practices in certain sectors more rigorously than in others, anddraws implications for practitioners and policy-makers. The methodologyadopted for this study is a combination of primary and secondary researchfollowed by expert interviews and a final consultative meet to discuss andvalidate the findings. The study has been conducted by Federation of IndianChambers of Commerce and Industry (FICCI) with technical assistance fromTata Consultancy Services Ltd (TCS) for the Project Management Institute(PMI).

We appreciate and thank all participants for their valuable contributions tothe study.

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Key questions add ressedProject delivery ... To what extent do organizations in India deliver onproject commitments?

Challenges and constraints ... What are the reasons behind not meetingcommitments?

Project management trends and practices ... To what extent are bestpractices adopted?

Project management capability ... To what extent is skilled man-poweravailable?

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Table of ContentsForeword IExecutive Summary 1Introduction to Six Key Sectors 11Automobile 12Defence 14Energy 15Infrastructure 17IT & ITES 19Real Estate 21Assessing Project Delivery 23Automobile Sector: Delivery Scenario 26Defence Sector: Delivery Scenario 28Energy and Infrastructure: Delivery Scenario 29IT- ITES:Delivery Scenario 31Real Estate: Delivery Scenario 32Challenges and Constraints 35Project Management Practices in India 43Project Project Initiation and Planning .44Project Execution: Adoption of Best Practices .45Project Monitoring and Control 52Program Management Office (PMO) in India 53Project Closure 56Building Capability: Commitments to Develop Resources 59Recommendations 63Annexure 69Project Management Guidelines 70Research Methodology 72PMI-FICCI Survey Questionnaire 73About PMI 76About FICCI 78Glossary 79Reference 81

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L ist o f Tab lesTable 1: Demand Supply Gap in Energy SectorTable 2: Investment Requirement for Indian Infrastructure (Billion $)Table 3: Project Delivery Scenario across SectorsTable 4: Foreign Investments for New Automobile Plant Development in IndiaTable 5: Capital Investments Defence IndiaTable 6: Performance of Project- Energy and Infrastructure SectorTable 7: Sector Specific- Project Delivery ConcernsTable 8: Three Focus Areas for Project Delivery ImprovementTable 9: Adoption of Best PracticesTable 10: Scope of PMO ServicesTable 11: Key Practices to derive value from Project Investments

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List of F ig uresFigure 1: Offshore Drivers- Program Governance and Process MaturityFigure 2: Assessing 3 Key Aspects of Project DeliveryFigure 3: Overall Project Delivery Scenario with regard to Scope, Schedule and BudgetFigure 4: Three Phases of Energy and Infrastructure ProjectsFigure 5: Performance of IT ProjectsFigure 6: City Ranks on the basis of Real Estate Projects DelayedFigure 7: Perception Map and Rank of Critical Causes of ConcernFigure 8: Varied Degree of Project Complexity across Project LifeFigure 9: Reasons for Project Delays and Cost Over-runFigure 10: Adoption Level-Project Planning ParametersFigure 11: Strategies and Best-Practices adopted to Control CostFigure 12: Perception towards Tools to improving Project DeliveryFigure 13: Effectiveness of Risk Management across the Project LifeFigure 14: Senior Leaders influence adoption of Centralized Governance FunctionFigure 15: Inter Project Coordination and PMOFigure 16: Adoption level of some of the Closure PracticesFigure 17: Benefits of Developing Project Management CapabilityFigure 18: Sector-wise Availability of Trained Project ManagersFigure 19: Strategies to overcome Resource Shortage and Skill DeficiencyFigure 20: Delivery Performance vs. Project Management Adoption MatrixFigure 21: Project Management Processes and Knowledge AreasFigure 22: Level of Activity along Project PhasesFigure 23: Primary Research Sample

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Executive Summary


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Executive SummaryModern project management process is a powerful transformationalmanagement methodology that has undeniably shown to help individualsand organizations successfully plan and accomplish many difficult objectivesand projects around the world. Project management has grown, matured andspread around the world to include a robust set of theories, principles,methodologies, practices, activities, professionals and organizations.Adoption of systematic project management practices in key sectors, such asautomobile, defence, energy, infrastructure, IT-ITES and real estate not onlyhelp attain project objectives but also provide a scope for national savings bylowering project execution costs.

The findings from this study may be summarized as given in the figure, whichpositions the six key sectors on two dimensions - 'Adoption Level of ProjectManagement Best Practices' and 'Project Delivery Performance'. This figurecaptures the perception of industry experts and project practitioners.

Relative size as percentage of GOP~Ooo~O J :I:ur : : :IIIE. . ..E. . .O Je,~ ; :: ::====1~O JC

oContributors to GOPoCapital ExpenditureHigh

Adoption of Project Management Best PracticesPage 1 2


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It is perceived that IT-ITES and the automobile sector have a high level ofadoption and performance. Infrastructure sector is the highest contributor toGross Domestic Product (GDP) among the six sectors studied; however,project management practices are yet to realize benefits in this sector.Defence is an investment sector from a national perspective, resulting incapital expenditure of about3% of the GDP.

Key Project Management Issues Automobile: New Product Development (NPD), time to market,

innovations, varied product families are considerations for projectmanagement in the Indian Automobile sector. Both Original EquipmentManufacturers (OEMs) as well as the component industry is highlycompetitive, demanding rigorous project management practices.

Defence: The desire to achieve self-reliance and technologyenhancements through long-duration research programmes offersspecific challenges in defence project management. Strategicprocurement aligned to technological advances and managing multipleinternational as well as national vendors are key requirements fordefence project management.

Energy: The energy sector is challenged to bridge supply-demand gap inkeeping with national requirements. Delivery of energy at cost effectivemeans and development of capacity for future growth, to meet thenational requirements require adoption of benchmarks and projectmanagement best practices.

Infrastructure: Inherent complexity of infrastructure projects involvesmultiplicity of stakeholders, compliance to regulations and clearances,implementations through public private partnerships (PPP). Effectiveproject management in this sector offers potential scope for nationalsavings by enhancing capital expenditure efficiencies.

IT-ITES: Two important drivers leading to the growth of Indian IT-ITESsector are capability enhancement in large program governance andprocess maturity. These define the path from labor arbitrage mode tostrategic partnerships for most Indian IT-ITES organizations. Managingprojects in various geographies, time-zones, operating withstakeholders from multiple cultures and handling new technology offerdistinct cha Ilenges.

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Real Estate: The Indian real estate sector is still largely unorganized anddominated by small and mid-sized players; with few corporate or largeplayers having national presence. Commitment to capabilitydevelopment through project management advocacy, awareness andadoption will improve the project delivery scenario in this sector.

Assess ing Pro jec t De liveryDelivery Scenario: in Delivery Scenario: on Delivery Scenario: within

initial SCOPE initial SCHEDULE initial BUDGETAutomobile: 60% projects arein scope across OEM andcomponent manufacturers

Development is a key imperativefor the sector driving more than60% projects on schedule.

Automobile: More than 80% ofprojects are within budget. OEMas well as the component industryis highly competitive ; Budgetmonitor ing is a r igorous practice

~I~ ~Defence: About 60% projectswithin initial budget. Difficult toset initial budgets for R&Dprojects as scope and schedulevaries over the project life.

1-Energy: More than 22% of theprojects experience cost over-run

-Real Estate : Almost 80% in scopeas project output is well -def ined

Real Estate: 54% to 88% ofprojects in various metro c itiessuffer from delays of average 7months

-Real Estate: Delays lead to costescalations

Automobile: New Product

I~ -1-Defence: Difficult to ascertain Defence: Delays recorded indefinite scope at project initiation defence projects caused due tophase leading to concurrent strategic procurements,planning and execution technology obsolescence

and research projectsI~Energy: 2 out of 5 organizations Energy: Delays in more thanare able to complete 80% projects 60% of the projectsin scope1- -1- ~- ~Infrastructure: 75% agree scope Infrastructure: More than 80% of Infrastructure: More than 33%creep is a major cause behind infrastructure projects have time of the projects are experiencingproject cost over-run over-runs cost over-run.1- 1- 1-IT-ITES: 3 out of 5 organizations IT-ITES: 3 out of 5 organizations IT-ITES: 3 out of 5 organizationscomplete only about 50% projects complete 80% projects on time. deliver 80% projects within initialin scope. Software being an Effective time management is budgets. IT projects undergointangible product; estimation of always a client requirement in change in initial scope thereforeproject scope in initiation phase is the IT-ITES sector. budget revisions are necessary.a distinct challenge.

It is observed that a higher number of Indian projects are within initial budgetas compared to meeting initial scope and schedule. 86% perceive that more than 50% of the projects are within initial

budget 63% perceive that morethan 50% of the projects are on initial schedule 49% perceive that morethan 50% of the projects are in initial scope

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IN SCOPE ON SCHEDULE W ITHIN BUDGET

% Projects. less than 20% .21% to 50% 51% to 80% greater than 81%Numbers in the pie-chart indicate % of respondents choosing a particular band

Cha llenges and Constrain tsCritical concerns revealed through the research provide focus areas forintervention. The following figure indicates the perception map and rankingof these critica Iconcerns.

IInabili ty to synchronizeproject plan anexecution.. Difficulty to involve

multiple and diversestakeholders

IIneffective utilization ofbest practices andbenchmarks

Inaccurate assessmentof project riskIILack of capability to...............manage projectcomplexity fJ



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Project Management Practices in IndiaProject Initiation and Planning

While most large organizations consider multiple parameters duringplanning phase, they do not consider industry best practices.

Only about 10% of respondents adopt quantitative methods; 33%adopt qualitative subjective approach and majority (about 57%)adopt a mix of quantitative and qualitative approach for planning andestimation.

Only 65% of the large organizations include project risk managementas a planning parameter; of which 67% feel that there is anopportunity for improvement in the current approach adopted foridentifying project risks.

Project Execution: Adoption of Best Practices

It is observed that in planning and execution phase, adoption of best practicesis largely absent. Yet most organizations attempt to improve performanceduring the execution phase. Most organizations in India adopt best practicesto improve performance in three specific areas:

Strategies to arrest cost: There is a high level offocus on cost

Strategies to ensure project delivery: Mostly, large organizationsfocus on project delivery

Strategies to manage project risk: Limited adoption of riskmanagement best practices

It is perceived that management reviews influence adoption of best practicesduring project execution. Further, only: about 50% of major players andindustry leaders adopt best practices.


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Measures tracked for projectdelivery improvement

Adoption level of Best Practicesacross the sectors

Project Cost PerformanceCost High SectorReturn on Investment

Project Schedule Performance AutomobileProject Cycle-Time Defence

Delivery Staffing Medium EnergyStrategic Business Alignment InfrastructureVoice of CustomerKnowledge Management IT-ITES

Real EstateRisk Risk Management Capabil ity Low

Project Monitoring and Control Standard success factors tracked include project schedule, scope,

budget, quality and targeted benefits in large organizations. 92% perceive that senior leaders are involved in project reviews. It is

further perceived that involvement of seniors leaders is a primereason for adoption of best practices

About 80% of industry leaders have centralized function to monitorand control project execution. However, the maturity varies acrosssectors.

Mid-sized and small organizations identified weak monitoring andcontrol as primary reason for project delays.

Project Management Office 82% of industry leaders perceive that PMO enables process

improvement by rigorous monitoring and control. 78% ofthe PMOs are involved in monitoring and controlling projects;

they prepare dashboards and facilitate high-level reporting on projectperformance.

71% ofthe respondents from large organization acknowledge PMO'srole in project management training and organizational capabilitydevelopment.



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Project Closure About 78% of large organizations have some mechanism to record

project best practices, however, re-use level remains unaccounted inmost cases.

73% of large organizations conduct a post project review oncompletion.

Only about 55% of large organizations and industry leaders analyzeta rgeted benefits from the projects.

Small and mid-sized organizations do not follow structured projectclosure practices. They lack capability to track project benefits over aperiod of time.

Project Management Capability 78% of the respondents perceive that adoption of structured project

ma nagement practices hel p meet delivery comm itments. 75% perceive developing in-house training vis-a-vis 45% perceive

collaboration with educational institutes as a more effective strategyto develop project management capability.

About 60% have in-house project management trainings; thesetrainings have varied levels of effectiveness.

Organizations lack project managers. 70% perceive that shortage ofproject managers influences delivery; 41% actually suffered due tolackoftrained project managers.

68% have a structured approach to project team formation. Only 38% of large organizations emphasize on employing certified

project managers.


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Have adequate number oftrained project managers?

SectorAutomobileDefenceEnergyInfrastructure ..

Strategies to improve utilizationof available resources

Strong forecasting and planningMonitoring of resourceutilizationBenchmark resource uti lizationwith competitorsMonetary incentives forincreasing productivityStructured project managementtraining and certification

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Automobile: Around 50% stress on employing trained project managersDefence: Most projects go through a structured approach to select andform teams. Most defence organizations have in-house programmes totrain managers.Energy: 60% stress on employing certified project managers foroutsourced projectsInfrastructure: Low awareness on project management capacity bui ldingIT-ITES: Characterized by training, advocacy and certif ications for projectmanagementReal Estate: Only large organizations and industry leaders focus onbui lding project management capabil ity

D evelo p In -H ouse In creas e In ves tmen t in D evelo p Structured In crease co op eratio n w ithPro ject A cad emy Existin g Emp loyees Train in g Pro grams Ed ucation al Ins titutes

V ery E ffective E ffective S om ew hat E ffective N o t E ffective



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I n t r o d u c t i o nto S ix Key Secto rs


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Introduction to Six Key SectorsEach of the six sectors identified for this study i.e. automobile, defence,energy, infrastructure, IT-ITES and real estate contribute significantly to thecountry's GDP and are the national growth drivers. The adoption of projectmanagement practices can support the organizations in these sectors tomanage their projects more efficiently and with optimal utilization ofresources. However, the level of adoption of project management practicesvaries across the sectors. Some sectors such as IT-ITES are perceived to havemore mature practices as compared to the infrastructure sector. Also, thechallenges and constraints in adopting the project management practicesvary across sectors and therefore require focus accordingly. This section givesan overview of the identified sectors highlighting the sector specific issues.

AutomobileThe automobile industry in India isthe seventh largest in the world withan annual production of over 2.6million units in 2009. India hasemerged as Asia's fourth largestexporter of automobiles, behindJapan, South Korea and Thailand.Following economic liberalization inIndia in 1991, this sector hasdemonstrated sustained growth as a result of increased competitiveness andrelaxed restrictions. Several Indian automobile manufacturers expandedtheir domestic and international operations. India's economic growth led tohigh growth of the domestic automobile market thereby attracting significantIndia-specific investment by multinational automobile manufacturers. Indiais fast becoming an auto-hub, with many new projects, worldwide, beingtransferred to India. Along with cost effectiveness, if India can deliver theproducts as per expectation, few Asian countries will be able to outdo India'svalue proposition.

The automobile sector thrives on constant innovation in product design. NewProduct Development (NPDj therefore is particularly relevant to the

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automobile sector, and Project Management is an accepted approach tomanage NPD. NPD differs from other business activities as it needs managingthe complexities of long project life cycles, product families, vendorrelationships among others. NPD in the automobile sector requirestechnology integration of electronics and software with tough cost andquality targets in the manufacturing stage. NPD is often executed in a dynamicenvironment, with project contributions coming from different departments,divisions, OEMs and other component suppliers. Adoption of projectmanagement best practice is therefore expected to help the sector managebetter their product innovations.

The key developments in the Indian automobile sector aresummarized below:

In 2002, the Indian governmentformulated an auto policyaimed at promoting anintegrated, phased and self-sustained growth of theindustry.

India is on its way to become aglobal manufacturing hub. Highlevels of competence in design and processes, high productivity andlow cost are the forte of Indian auto-makers.

OEMs aswell as t he component industry are highly competitive. Mostautomotive players are present in more than one segment.

Indian firms are increasingly partnering with foreign firms acrosssegments adopting best practices and benchmarks.

Indian automotive regulations are in the process of being aligned withEuropean regulations. This calls for awareness on EURO I, II, III, IVguidelines as part of project investments and planning in India.

Indian Automotive Mission Plan (AMP) estimates that vehicles salesin India is expected to grow to 32 million by 2015-16. This will lead tolarge project implementations.

National Automotive Testing and R&D Infrastructure Project (NATRIP)is an initiative to strengthen R&D infrastructure for the sector.

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DefenceThe defence sector in terms of projectmanagement covers government andcommercial industries involved inresearch, development, production,and service of military equipment andfacilities. The project success alsodepends on the defence contractorswhich are business organizations orindividuals that provide products orservices to government and the defence production industry, which producesguns, ammunition, missiles, military aircraft, ships and their associatedconsumables and systems. As a consequence of industrial policyinterventions, the defence sector in India today works through a largeinfrastructure for defence production consisting of 39 ordinance factories, 8defence PSUsand 50 R&D labs.

Production of defence equipment has always been under the purview ofgovernment. However, for quite some time, India depended on the foreignindustries for its military hardware. The desire to achieve self-reliance hasalways been there. Constraints of technology and resources prevented theprocess from fructifying to the extent desired. In the quest for self-reliance,the government has been continuing its efforts to indigenize equipment,wherever technologically feasible and economically viable. As a part of thisinitiative, there is a focus to locate and develop broad-based indigenoussupply source for many complicated and intricate equipment both in thepublic sector and in civil trade. Contrary to the common perception, theprivate sector has been playing a significant role in the defence industry sectoras sub contractors and as an ancillary industry. The private sector has beenmainly involved in supply of raw materials, semi-finished products, parts andcomponents. Defence PSUs and ordinance factories have been outsourcingtheir requirements to private sector in the range of 20-25%. Out of thisoutsourcing, about 25% requirement is met through the small-scale sector.Several hi-tech equipments have also been successfully produced by theprivate sector.

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Procurement and vendor management is pivotal to defence sector projectmanagement. To standardize procurement management, government hastaken major steps to make the arms procurement process more transparentby fine-tuning the Defence Procurement Procedure (DPP) 2006. Experts feelthat the new Defence Procurement Procedure Manual would reduce delays inthe procurement process, thus improving project delivery. DPP alsoemphasizes on a procedure that would pave the way for indigenous research.The government has emphasized the need for multi-disciplinary IntegratedProject Management Teams (IPMTs) for each project that would assess theresponses received from the developing agencies. A Defence OffsetFacilitation Agency (DOFA) has been set up under the Department of DefenceProduction and will act as a single window agency to facilitateimplementation of the offsets policy. It will assist in vetting of offset proposalstechnically and in monitoring the offset provisions. There is definitely aturnaround in the way Ministry of Defence intends to manage projects withincreasing focus on concepts like Life Cycle Costing (LCe) for all the majorupcoming programmes.

EnergyRenewable and nuclear energy in India arestill in their early stages of development.India was probably the first country in theworld to set up a separate ministry of non-conventional energy resources in early1980s. However, renewable energy (RE)contribution to energy sector is less than 3%of India's total energy needs.The Indian energy sector is increasinglybecoming more competitive, with largeprivate players getting into the sector ofenergy production. The imperatives forcompetition may be derived from multiplefactors; some of them have been discussed

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here. The primary driver for competition in the sector is perhaps the need tobridge the demand and supply gap as shown in table 3. Among other reasons,the entry of private players within the sector has given rise to competition andpricing issues.

Table 1: Demand-Supply Gap in Energy Sector.Energy Source Gap/ Shortage

Electr icity ( In Million KWh) 521872 480242 (41630)Oil (In MMT) 128 33* (95)Gas (In Mscmd) 162.03 81.17 (80.86)Coal (In MT) 415 378.6 (36.4)

* Domestic Production;KWh -kilowatt hours,MMT -Mill ion Metric Tonnes,MT-Mil lion Tonnes;Mscmd-Million standard cubic meter jday

Source: Ministry of Power

Other factors influencing competition in the energy sector are its pricingstructure and the need for massive investment in this sector. Consumers inIndia pay one of the highest prices for energy in purchasing power parityterms. For instance, in the electricity sector, average tariff on purchasingpower parity basis in India is 30.8 cents/kWh, while it is 7.7 in US, 15.3 in Japanand 20.6 in China.

In order to deliver a sustained GDP growth of 8% till 2031-32, therequirements include growth in primary energy supply by 3-4 times overcurrent consumption; increase in electricity installed capacity by 6-7 times,and increase in the annual coal requirement nearly 3 times over currentdemand. To tide over such a competitive scenario, adoption of structuredproject management practices is a necessity and is being realized by most ofthe major energy players in India. Most of the large players are adoptingstrategies for cost control and risk management. However, the sector stillfinds it difficult to overcome project execution hurdles presented in the form

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of complex policies, regulations, government and environmental clearances.The general consensus among experts seems that the outcome of energysector projects is perhaps difficultto predict and control.

InfrastructureThe infrastructure sector in India haswitnessed an unprecedented paceof growth with exponential demand,increasing technologicalsophistication amongst others.Wh ile th is trend is expectedto continue, time and cost over-runsthreaten to limit this sector'spotential. Of the 1035infrastructure sector projects completed during April 1992- March 2009,41 %faced cost over-runs and 82 %witnessed time over-runs.

Total infrastructure spending has doubled between 2005 and 2009. It isestimated that the Infrastructure sector needs to grow at a CAGR of 15% overthe next five years to support the growing requirements of virtually everyother sector of the Indian economy. There is a huge scope for national savingsby adopting structured project management practices while dealing withinvestments. The investment requirement for Indian Infrastructure is shownin table 2.Table 2: Investment Requirement for Indian Infrastructure (Billion U S D )

'p. ii'j@!ilikk.';Mkk-WS[.!I-130 66 49 11 9 55 _ M m -320Source: The Parekh Committee Report

To meet the requirements, and stimulate and mobilize increased privatesector investments, either from domestic sources or foreign avenues, thegovernment is offering various incentives. Some of these incentives areliberalization of Foreign Direct Investment {FOIl, extended tax relaxations,policies enabling Public Private Partnerships (PPP). To harness private sector



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efficiencies in design and construction of infrastructure projects, the planningcommission envisages that at least 75% of the new investments ininfrastructure will come from the private sector - some in the form of fullyprivate ventures, others as public-private partnerships. India has madeconsiderable progress in the past decade in attracting private investment intoinfrastructure; first, in telecommunications then in ports and roads, and mostrecently in airports and container freight. Among other reasons, the entry ofprivate players within the sector has given rise to competition and pricingissues. However, progress in other sectors is painfully slow. In addition to theinherent complexity of infrastructure projects and multiplicity ofstakeholders, the PPPmodel adds new dimensions and constraints to projectmanagement and delivery.

R elev ant H ig hlig hts of Infra struc ture S ector

Road: Although India's road network is thethird largest in the world, itstill lags behind the networks in other countries and in terms ofquality. The government has launched several projects, such asNational Highway Development Program (NHDP), the Pradhan MantriGram Sadak Yojana (PMGSY) and the Special Accelerated RoadDevelopment Program in the North East (SARDP-NE), to improve roadconnectivity in the country.

Railways: Major initiatives in the sector has been identification ofprivate sector participation, construction of a dedicated freightcorridor, launch of metro projects, operation of private containertrains and manufacture of rolling stock, development of multimodallogistics parks and hospita lity services.

Ports: Government has formulated the National MaritimeDevelopment Programme (NMDP) to enhance the capacity andefficiency of Indian Ports. Underthe aegis of NMDP, 276 projects wereidentified for major ports with an anticipated investment of ~ 585billion, aiming to increase the total capacity of ports to 1001.8 milliontons by FY12. Private sector participation is promoted via automaticapprovals and tax incentives allowing 100% FDI in special cases.


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Aviation: Over the past decade India has emerged as the fastestgrowing aviation market. The government has formulated and is inthe process of implementing aggressive plans to invest ~ 400 billionfor airport development and modernization across the country. 100%FDI has been allowed for greenfield airports in Tier III cities.

IT-ITESThe Indian IT-ITES industry indicatesrevenues of $71.7 billion inFY2009-2010, with the IT softwareand services industry accounting forUSD 60 billion of revenues. Duringthis period, direct employmentreached nearly 2.23 million, whileindirect job creation is estimated tohave touched 8 million. As aproportion of national GDP, the sector revenues have grown from 1.2% inFY1998 to an estimated 5.8% in FY2009. The sector's share of total Indianexports (merchandise plus services) has increased from less than 4% in 1998to almost 16% in 2008. The Export revenues are estimated to gross $ 47.3billion in FY2009, accounting for 66% of the total IT-ITES industry revenues.While the USwith a 60% share remains the largest export market for Indian IT-ITES services, incremental growth is being driven by the European market,with UK and Continental Europe growing by a CAGR of 41.4 % and 51.4 % inthe period FY2005-FY2009. The IT-ITESindustry caters to a vertical market mixand is well balanced across several mature and emerging sectors. While theBanking, Financial Services and Insurance segment (BFSI) remains the biggestdomain for IT-ITES intervention with over 41% of total revenues, verticalssuch as Hi-tech /Telecom, Manufacturing and Retail are increasing.

The industry is dominated by large integrated full-service and product playersconsisting of both Indian and international origin. It is observed that thedemand for off-shoring is driven by specialized skill sets and not just laborarbitrage. The Indian IT-ITES industry clients are now seeking more than justcost savings. They are looking at the country's service providers as



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transformation partners, innovating and developing customized solutions toaddress their needs. As a result, Indian companies are now trying to adopt aculture that encourages innovation, embraces new trends such as Green IT,and delivers solutions that are focused on re-engineering and transformation.Proactive capability building through focused investments across domains,programme governance, processes capability, and technology expertise,coupled with added flexibility and scalability, deliver an India valueproposition. Companies are increasingly looking inwards and focusing onprocess benchmarking, enhanced utilization of infrastructure and talent,increasing productivity and greater customer engagement. India enjoys anaverage cost advantage of around 60-70% as compared to source markets.Additional productivity improvements and the development of tier II and IIIcities as future delivery centers are expected to enhance India's costcom petitiveness. To develop India as a trusted sou rcing destination, India n IT-ITES companies have put in place world class security and projectmanagement standards, to ensure high levels of quality and service delivery.

In addition, the government's focus on education has helped create the largetalent base from where the industry draws its workforce. Establishment ofSoftware Technology Parks of India (STPI) stands out as a seminal policyaction, specifically targeted towards encouraging, promoting and boostingthe export of software and services from India. Public and private enterpriseshave contributed by building the required capacities of key businessinfrastructure, enabling this sector to enjoy world-class facilities and services.The government's proactive approach towards the IT-ITES sector ishighlighted through actions such as the IT Act Amendment, extension of taxincentives, and introduction of progressive policies among others.

Within the IT-ITES sector, adherence and compliance to standards such as ISO27001, EU directives, SOX, PCI, HIPAA, PMBOK@Guide, CMMi and GLBA, andcertification such as PMP ensure the establishment of a proper risk andgovernance management framework buttressed by monitoring, testing andauthorization. It is perceived by most IT-ITES project managers that the twomost important drivers of off-shoring and outsourcing, leading to the growthof Indian IT-ITES sector, are capability enhancement and gaining credibility inlarge program governance and process maturity as shown infigure 1.

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Figure 1: Offshore Drivers- Program Governance and Process Maturity

Xl(Captive Centers)

X2

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - : ; ~ - ~ ~ ~ - ~ ~ - ~ ~ - : ~ ~ - - - .I II II OJ I: E ~ : V ~I rn rn I VI 'c: b . o ~ : ~ :JI 0 OJ I e r n: 0 : : 6 : 0.. ~: 19 :I II II I

OJos:VCo Vi V 2

In-source OutsourceLeverage: (FTE at X1 + FTE at X2) / (FTE at X1 + FTE at X2 + FTE at Y1 + FTE at Y2)FTE: Full-Time Equivalent

Note: Outsourcing may happen locally or to India (offshore). At the same time, captive centers in India may bea part ofthe organization or it may be an outsourced to avendor operating from India. By offshore leverage wemean proportion of people operating from offshore location irrespective of whether the people are part of thesame organizat ion or not.

Real Esta teThe Indian Real Estate sector playsa significant role in the country'seconomy. The Real Estate sector issecond only to agriculture in termsof employment generation andcontributes heavily towards thegross domestic product (GDP). Thehousing sector contributes almost5 % of the country's GDP. In thenext five years, this contribution to the GDP is expected to rise to 6 %.Developments in the Real Estate sector are being influenced by thedevelopments in the retail, hospitality and entertainment (for example,



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hotels, resorts, cinema theatres) industries, economic services (for example,hospitals or schools) and information technology (IT)-enabled services (likecall centers) and so on and vice versa.

The IT-ITESsector alone is estimated to require 150 million sq ft of office spaceacross urban India by 2010. Organized retail is also responsible forthe growthin commercial office space requirement. The organized retail industry is likelyto require an additional 220 million sq ft by 2010. Moreover, growth is notrestricted to a few towns and cities but is pan-India, covering nearly all Tier-I,Tier-II and Tier III cities.

The Indian Real Estate sector is still largely unorganized and dominated byquite a number of small and mid-sized players,with very few corporate or large players havingnational presence. Supply of urban land is largelycontrolled by state-owned development bodies,such as the Delhi Development Authority (DDA),and Housing Boards .The Indian Real Estatesector, as compared to the other moredeveloped Asian and Western markets ischaracterized by smaller size, lower availabilityof good quality space and higher prices whencompared in purchasing power parity.

The Real Estate scenario in major projects acrossIndia will disappoint many buyers, as the number of delayed projects hasincreased multi-fold. Bangalore has the highest number of delayed projects.In Bangalore alone, 309 of the 575 projects are delayed, with the averageduration of delay being about nine months. In Pune out of 665 projectsstudied,305 are delayed, with the average duration of delay being about eightmonths. Similar trends emerge in National Capital Region (NCR), underscoringthe need to adopt a structured project management approach. While in thereal estate sector almost 80% are in scope and as project output is well-defined, controlling projects in schedule and avoiding cost over-runs is a verybig cha Ilenge.

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As se s s i ngPro ject D elivery


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Assess ing Pro ject De liveryProject delays and cost over-runs have significant implications from thenational economic perspective. Services provided by projects of a particularsector serve as input for other sectors of the economy. For example,successful project completion in the Infrastructure sector has directrelationship with the growth of IT-ITES sector. Cost over-runs in projects leadto an increase in the capital-output-ratio for the entire economy. Simply put,delays and cost over-runs reduce the efficiency of economic resources andcapital expenditure; limiting growth potential of the entire economy.

The project delivery performance of various sectors is difficult to assess asthey have different operating conditions. There is always a risk that inaccurateperceptions will take over and misguide the future actions and policyinterventions. For instance, the perception that the public sector is incapableof delivering projects in time and on cost, may lead to excessive public privatepartnership.

This section attempts to assess the project delivery capability, for theidentified six key sectors, on three pivotal dimensions of a project namelyscope, schedule and budget as shown in figure 2. The assessment of presentor completed projects vis-a-vis initially planned scope, schedule and budgetcan to some extent bring out if organizations in India are delivering to theinitial commitments.

F igure 2 : Ass es sin g 3 Key Aspec ts o f P ro je ct Deliv ery3 Key Aspects for assessing project del ivery-Scope,Schedule and Budget

What % of the projects running/completed arewithin the initial scope?What % of the projects running/completed arewithin ini tial schedule?What % of the projects running/completed arewithin ini tial budget?

Project Management: 3 KeyAspects

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To what extent do organizations in India deliver projectcommitments?

Our primary research, a high number of Indian projects are within initialbudget as compared to being in initial scope and schedule as indicated infigure 3. 86% perceive that morethan 50% of the projects are within initial budget 63% perceive that morethan 50% of the projects are on initial schedule 49% perceive that morethan 50% of the projects are in initial scope

Figure 3: Overall Project Delivery Scenario with regard to Scope,Schedule and Budget

IN SCOPE

% Projects

ON S CHEDULE W ITHIN BUDGET

less than 20% .21% to 50% .51% to 80% greater than 81%Numbers in the pie-chart indicate % of respondents choosing a particular band

The delivery scenario varies across the six sectors as indicated in table 3.

l ~.



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Tab le 3 : P ro je ct D eliv ery S cena rio a cro ss Sec to rsDelivery Scenario: in Delivery Scenario: on Delivery Scenario: within

initial SCOPE initial SCHEDULE initial BUDGETAutomobile: 60% projects arein scope across OEM andcomponent manufacturers

Development is a key imperativefor the sector driving more than60% projects on schedule.

Automobile: More than 80% ofprojects are within budget. OEMas well as the component industryis highly competitive ; Budgetmonitor ing is a r igorous practice-I~ -Defence: About 60% projectswithin initial budget. Difficult toset initial budgets for R&Dprojects as scope and schedulevaries over the project life.

1-Energy: More than 22% of theprojects experience cost over-run

-Real Estate : Almost 80% in scopeas project output is well -def ined

- -Real Estate: Delays lead to costescalations

Automobile: New Product

I~ -1-Defence: Difficult to ascertain Defence: Delays recorded indefinite scope at project initiation defence projects caused due tophase leading to concurrent strategic procurements,planning and execution technology obsolescence

and research projects1-Energy: Delays in more than60% of the projects

1-Energy: 2 out of 5 organizationsare able to complete 80% projectsin scope1- -1- -1- -Infrastructure: 75% agree scope Infrastructure: More than 80% of Infrastructure: More than 33%creep is a major cause behind infrastructure projects have time of the projects are experiencingproject cost over-run over-runs cost over-run.1- 1- 1-IT-ITES: 3 out of 5 organizations IT-ITES: 3 out of 5 organizations IT-ITES: 3 out of 5 organizationscomplete only about 50% projects complete 80% projects on time. deliver 80% projects within initialin scope. Software being an Effective time management is budgets. IT projects undergointangible product; estimation of always a client requirement change in initial scope thereforeproject scope in initiation phase is in the IT-ITES sector. budget revisions are necessary.a distinct challenge.

Real Estate: 54% to 88% ofprojects in various metro c itiessuffer from delays of average 7months

Source: FICc/ Analysis

Au tomob ile Sec to r: Deliv ery Scena rioIndian automobile firms have continued to defy the global slowdown and registeredquantum leap on both exports and domestic sales. The automobile industry in India isseento adopt structured approach to project management, especially in the domain ofNew Product Development (NPD).The industry is experiencing healthy investment inboth independent enhancement projects aswell as manufacturing plant developmentunderscoring the point that the global majors are discovering confidence in India.Recent foreign investments in automobile projects are outlined in table 4. Adoption ofbest practices and benchmarks will ensure greater investments and better projectcommitment delivery inthis sector.

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Table 4: Foreign Investments for New Automobile PlantDevelopment in India

Company Investment *(USD million)

Capacity(Cars/ year)

Fiat-Tata 1000 200000Ford 500 100000

General Motors 325 140000

Honda Siel 250 200000Mahindra-Renault- Nissan 1125 400000

Toyota- Kirloskar 350 100000Volkswagen 937 NA

Total 4487 1140000'Investments partially realized and partially planned Source: Industry Estimates

The typical delivery priorities perceived forthis sector are as listed: Lower time to market aligned with customer preference and buying

behavior; Innovations to satisfy technology requirements of the consumer; Maintaining inventory atthe right level and atthe optimum mix; Maintaining distribution channels for delivering the outputs; Managing component manufacturers and othersuppliers

Automobile industry experts perceive from a project management view thatthese priorities translate to varied capabilities such as brand management,customer relationship management, core competency management,technology management, quality management, product developmentmanagement and expansion management.



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Defence Sec to r: Deliv ery Scena rioA number of projects are coming up in the defence sector and projectmanagement has become an integral part to manage the various projects.The availability of budget for acquisition of new equipment during the last fewyears is shown in table 5. There is an indication that during 2004-05 there wasa spurt in capital spending. Since then there has been a steady increase in theannual budget available for capital acquisitions. With the entry of the privatesector, large resources in terms of latest technologies, management andscientific skills, and its ability to raise large sums of money have broughtdefence production to the center stage. India is likely to reach an annualbudget of $40 billion by the end of the 11th defence plan (2011-2012). Of this,about $16-17 billion would be available for capital expenditure. An analysis ofmajor purchases during the last 5-6 years shows that major contracts havebeen signed for the Air Force and Navy. Defence observers feel that this trendis likely to continue.

Table 5: Capital Investments Defence IndiaYear Annual Budget

($ Billion)2002-2003 I I 3.32003-2004 3.82004-2005 7.3

2005-2006 7.32006-2007 7.7

2007-2008 8.6

2008-2009 11

I

I

Source: Industry EstimatesLarge inductions of four types of 155 mm guns, dry and wet bridges, bi-modular charge systems, specialist vehicles, Air Defence gun and missilesystem, night vision devices are among a host of requirements, neededurgently.

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Defence project managers require specialized capabilities to manage:

Funding issues to obtain equipments of latest technology. They may facedelays in financial approvals as a lot of considerations go into defenceprocurements.

Strategic procurement by managing advanced contracts and keysuppliers.

Capabilities to conduct technical evaluation so that projects,procurements and equipments do not suffer from technologicalobsolescence.

Manage complex R&D projects spanning over long durations typically inthe rangeofS-10years

The defence sector is increasingly buying into the idea of appointing nationalor international consultants to manage projects. This initiative brings a lot ofbest practices within the purview of defence project execution.

Energy and Infrastructure: Delivery ScenarioThe performance of energy and infrastructure projects in India may bestudied together because of their commonalities in implementation anddelivery. Both these sectors are observed to manage high-value projects, thelife and gestation period for the projects span over many years and involvemultiple public and private stakeholders, execution is regulated throughgovernment policies, guidelines and clearances. As a part of this study, theenergy sector is represented by atomic energy, coal, petroleum & natural gasand power. The infrastructure sector is represented by railways, roadtransport and highways, shipping and ports and steel. Typically, projects ininfrastructure and energy sectors are highly technical, involving complexestimation and planning. Broadly put, these projects are observed to havethree phases: development, construction, and operation and maintenance asshown in figure 4. In the beginning of the development phase, theorganization sponsoring the project prepares estimates of time and cost(funds) needed to complete the project.



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However, such estimates cannot be taken as sacrosanct as they are observedto undergo major revisions over the entire project life. An expected date ofcompletion is generally announced for large infrastructure and energyprojects. The actual date of completion is invariably different from the

Figure 4: Three Phases of Energy and Infrastructure Projects

T=O T=1 Time T-2 T=3

ProjectDevelopmentPhase

Construction/ProcurementPhase

OperationMaintenancePhase

expected date. The 'implementation phase' or 'implementation period' is theduration in which a project is planned to be completed, that is, the durationbetween the date of approval of the project and its expected date ofcompletion. This phase is typically followed by an operation and maintenancephase in most infrastructure and energy projects. The operation andmaintenance phase may be treated as a different project or as an extension tothe main project.

Table 6 gives a summarized view of projects completed in the Energy andInfrastructure sector during April 1992-March 2009. Most of these projectsare funded and managed by the public sector; however, a few of them arepublic private partnerships. These are typically large or mid-sized projects,each worth at least r.20 crore.

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Table 6: Performance of Project- Energyand Infrastructure Sector

% Projects withCost Over-run

Coal

47

25

95 22

Petrochemicals 3 33Power 10 7

% Projects withCost Over-run

Railways 83Road transport and 154 54 85Highways

Shipping and Ports 61 31 95

Steel 43 19 81

Source: MoSPI ReportAccording to the MOSPI report, as on March 31, 2009, more than one-third ofthe ongoing projects are experiencing cost over-runs. Collectively, cost over-runs for these projects are at ~ 73791.51 crores; which is 54.75% of theiroriginal cost and 13.45% ofthe cost of all projects. From another perspective,the cost over-runs in the ongoing projects are larger than the threeconsecutive fiscal packages announced during 2008-09. Similarly, delays aretoo frequent and, at times, intolerably long. Out of 925 ongoing projects, 445have aIready experienced delays.

IT -ITES: De livery ScenarioFundamentally, project management is a continuous process feedback loopby which IT-ITES organizations prioritize demands of each project.Organizations allocate funds and resources as per investment initiatives andmanage governance-orientated collaboration with the businessstakeholders. Thereby IT-ITES sector is able to deliver expected results from



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the IT investments. 81% of IT investments by global organizations in India areperceived to be successful. However, 46% of them are perceived to be overtime or budget as indicated infigure 5.

Figure 5: Performance of IT Projects

65%


Consolidated project planning and execution is increasing with more andmore organizations adopting project management practices in both privateand government sectors. Project management related investment in IT-ITESsector amounts to about 18% of the overall IT project spend. The distinctexecution focus areas for IT-ITES organizations are perceived to be workingacross multiple geographies and culture, technology and innovation, processimprovement, resource and knowledge retention and building domainexpertise.

IT-ITES Project Governance in India includes components such as corporategovernance and risk management. The rising interest in IT governance in Indiamay partly be attributed to required compliance to various global initiatives,for instance Sarbanes-Oxley in the USA and Basel II in Europe; and to the factthat most global clients stress on programme management and governancecapability before off-shoring or outsourcing to India.

Real Esta te : De liv ery Scena rioAlmost 80 % of India real estate is residential space; the rest comprises offices,shopping malls, hotels and hospitals. According to the Tenth Five Year Plan,

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there is a shortage of 22.4 million dwelling units. Thus, over the next 10 to 15years, 80to 90 million dwelling units need to be constructed with a majority ofthem catering to middle- and lower-income groups. In this context, it is amatter of great concern that this sector is plagued in delivering and living upto its promises. Figure 6 shows ranking of cities on the basis of real estatesector projects getting delayed. Project delays in most cases lead to cost over-runs.F ig ure 6: C ity R an ks o n th e b asis o f R eal E state P ro jec ts D elayed

100%90%

~ 80%u


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Ch allen ges an d Co n s tra in ts


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Challenges and ConstraintsAny organization, irrespective of the sector it might be operating in,undertakes a project only when it is critical to its business operations. In thissection, we identify some of the critical causes of concern, genericimpediments and challenges towards project success, also highlightingimportant sector-specific issues. Figure 7 shows a perception map and ranksof some critical causes of why projects in India are not able to deliver projectcommitments?Most respondents feel inaccurate assessment of project risks is a primarycause of concerns. The other causes of concerns are:

Lack of capability to manage project complexity Inability to correctly estimate and monitor project delivery Ineffective utilization of best practices and benchmarks Difficultyto involve multiple and diverse stakeholders Inabilityto synchronize project plan and execution

The components contributing to each of the concern areas are as indicatedin a tabular format along with f igure 7.Figure 7: Perception Map and Rank of Critical Causes of Concern

m Inability to synchro~zeproject plan an

executio

Lackof capability to...............manage projectcomplexity 6

m Difficulty to involvemultiple and diversestakeholders

m Ineffective utilization ofbest practices andbenchmarks

nability to correctlyestimate and monitorII


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Inaccurateassessment ofprojec t r isks

Lack ofcapability to

manage projectcomplexity

Inability tocorrectly

estimate andmonitor

Ineffectiveutilization ofbest practices

and benchmarks

Difficulty toinvolve multipleand diversestakeholders

Inability tosynchronize

project p ia nandexecution

External Factors Scope creep Schedule and Resources Organizational Day-ta-day reviewBudget optimization Support & project

Policies and Expectation managementRegulations Management Risk Adoption of Best Communication

Practices and Fund and ResourceHealth, Safety, R&D Review Benchmarks Vendor MobilizationEnvironment Innovations Mechanism Management

Strategicprocurement

Inaccurate assessment of project risks: Experts perceive that, commonly,lack of effective risk sensing and risk management causes project failure.Organizations in India face difficulty in establishing a culture where theproject team members are like reporters on the ground who continuouslysense and report risk withoutfear of being blamed forthe risk.

Assessing risk is the key to any project's success, especially in the Automobilesector, where new product development is important. Ability to successfullyaddress and mitigate risk, lowers time to market and provides innovators'advantage. Projects in infrastructure and energy involve compliance tomultiple regulations involving health, safety and environmental risks.

Lack of capability to manage project complexity: Project Managementoperates in a management environment of chaos and complexity. There isdefinite lack of experienced project managers in India. What characterizesproject complexity and how this changes in the course of a project is shown infigure 8. Experts perceive awareness of project complexity will help Indianmanagers.



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Figure 8: Varied Degree of Project Complexity across Project Life

~xOJQEou. . . . .oOJOJb .oOJo

IIIIIIIIIIIProjects witli nointerim change in

scope

IIIIIIEnvironment 1IIIIIIII

In large projects, everything isin disorderin the beginning; the management staff,the partners - all want to see their viewsimplemented; the design is inpreliminary stage. Many decisions arerequired, all tasks seem of highestimportance and interlinked, and theconsequences cannot easily be foreseen.The middle phase is characterized byregularizing of the work. Generally,complexity is of low level in this phase.However, environmental influences orany other type of disorder (such asmistakes), social and cultural diversitymay lead to disruptions.During the end phase, the complexitypicks up again as new tasks such as scopevalidation, impact analysis and contractclosure need to be performed.

IIIIIIIIII

Environment 2IIIIIIIII

impor tant changein scope

Sudden increase ip cornplexlrvI II II IBeginning Middle Phase End

Figure 8 brings out two indicative levels of complexity in two differentenvironmental conditions experienced in India. The first one environment 1is for a smooth running project, the second one environment 2 is for a projectwith sudden scope change resulting in sudden increase of complexity.

Inability to correctly estimate and monitor: The inability to correctlyestimate and monitor is the prime reason behind project delays and cost over-runs in India. While there are other related reasons for time and cost over-runas perceived by project managers indicated in f igure 9. Nearly half of theproject ma nagers have experienced at least one project fa ilure recently due totime or cost over-run. 77% perceive that the project delays could have beenavoided by rigorous project planning, estimation and monitoring. In morethan 70% of projects the time delays have led to cost over-run.

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F ig ure 9 : Rea sons fo r P ro je ct D ela ys a nd Cos t Ove r-ru n

-"!'">e1212z -B'"'"JlOJc . : :e>-~OJo

O J>o""0e'"2Vi


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Ineffective utilization of best practices and benchmarks: Driving excellenceand achieving best practices in terms of cost management, timemanagement, change management and quality management during projectexecution is yet to become a focus area in Indian project managementpractices. In most cases, project teams in India are fire-fighting to ensureprojects don't run into cost or time over-runs. While most organizations fromthe IT-ITES and automobile sector and some of the large organizations areemphasizing to record project best practices, re-use level remainsunaccounted at large. Project managers in India rarely invest time to list downlessons learned from previous engagements. 78% of such organizationsperceive that best practices are recorded at the closure of projects while itshould be a continuous activity.Difficulty in involving multiple and diverse stakeholders: Overcoming thechallenge to create a shared vision of the project is necessary for its success.80% perceive that ownership of projects atthe senior leadership level definessuccess for a project. Further, clearly defined and understood project goalsand objectives, costs, and measures of success are of particular importance inestablishing a common understanding across varied stakeholders. This helpsto protect projects against excessive scope creep (evolving changes in therequirements after project initiation).Projects in Infrastructure and Energy sectors are seen to have multiple vagueownerships; thereby, critical decision-making is impacted and projects getdelayed leading to time and cost over-runs. However, defence projects inIndia are observed to have committed ownerships.Inability to synchronize project plan and execution: Projects are marked byconstant changes in user requirements and this tends to alter the scope ofprojects. The Project Execution Plan (PEP) that lays the foundation forplanning, controlling and managing of any project, is a dynamic document.Organizations fail to regularly update and communicate revisions to PEP.41%projects in India suffer as funds and resources are not available aligned to thedynamic needs of project execution.IT projects have a peculiarity - users tend to uncover more 'needs' aftercommencing the use of the systems. Thus, the IT projects are more vulnerableto scope creeps. In addition, unforeseen statutory and market changes forceat least 10-15% of the change requests in large IT projects. The need tosynchronize project plan has driven IT organizations in India to follow arigorous process of maintaining updated project plans.Table 7 indicates sector-specific challenges and causes of concern typicallymanifested through project delays and cost.

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--Automobile

Defence

Energy, andInfrastructure

IT-ITES

Real Estate

Tab le 7 : S ec to r Spe cific - P ro je ct D eliv ery Conce rn sProject Delivery Concerns

Scope and assumptions are not well documented. Designs are pr imary referencesInadequate risk planning and lack of periodic risk reviewsHeavi liy dependent on component manufacturersInability to correctly understand consumers requirements especially true forautomobile organizations in IndiaPlanning, production and even design are highly repetitive processes leading toconcurrent planning, design and executionTechnologyobsolescenceStrategic procurement is a challenge and leads to delaysLimited data available for estimationLong project duration spanning over 5-10 yearsProjects involve multiple clearances and high level of complexity in terms of regulationsand government policiesLand acquisition, capacity enhancement, and fund mobil ization cause delaysPoor project management capabil ity of vendors, suppl iers, and contractorsVery long negotiation t ime to establish contractsShortage of skilled manpower and at times unsafe work practicesDelay in customer payments resulting in negative cash flowRe-workdue to improper quality assurance management and design issuesLong waiting period for tests conducted for per formance assuranceDelay in administrative clearancesLack of business user and domain expert inputsChanging and incomplete requirements and specifications from client. Change requestwell after planning phase: No clarity on trade off between cost - time - scope and qualityIncorrect estimations and wrong planningUnavailabi lity of ski lled resources and employee attr it ionVarying standards across organizationsDif ferent projects follow different processesWorking across multiple geography, cul tures, technology and business domainsInadequate knowledge management and reuseVendor and procurement management

Material and resource acquisitionsMaterial cost escalationsStatutory clearances and compliance to regulationsDelay in executionLack of awareness of project management practicesLargely un-organized sector leading to limited use of standards and guidel inesCash flow issue-Developers diver t funds meant for one project to other projects

Page 141Source: FICc/ Analysis



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Pro ject Managemen tPractices in In d ia


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Project Management Practices in IndiaProject Initiation and PlanningExperts observe that one of the underlying constraints in project confusion inIndia is the pressure to quickly begin working on the deliverables. This actionis often accompanied by securing quick management approval for a level ofbudget and human resources from a friendly and often hurried sponsor. Theproblem that often occurs with this approach is that the resulting projectscope does not fit the allocation level. In turn, this approach causes acombination of the triple constraint set (time, budget, and functionality).Project stakeholders have different interests in the outcome of the project.Some are concerned about budget; some schedule; and many others,functionality. Project satisfaction is a compromise between these variouspoint of views.

While most of the respondents perceive that they adopt a structuredapproach to project planning and initiation, the parameters adopted duringplanning and initiation phase vary across sectors. Typical considerationsfactored in during project planning and initiation include scoping, budgeting,scheduling, resourcing, project execution planning, benefit articulation, riskidentification among other things. The consideration of these aspects acrossIndian industries is varied as shown in jigurelO. While most largeorganizations consider multiple parameters during planning phase, thematurity and capability of the existing processes remain unaccounted. Onlyabout 10% of respondents adopt quantitative methods; 33% adoptqualitative approach and 57% adopt a mix of quantitative and qualitativeapproach for planning and estimation. Small and mid-sized organizationsattribute lack of awareness to inadequate planning.

Only 65% ofthe large organizations include project risk management asa planning parameter. 67% feel that there is opportunity forimprovement in the current approach adopted for identifyingproject risks. Respondents also indicate "inaccurateproject risk assessment" as the most critical cause ofconcern for project execution in India.

0


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The project initiation and planning phase typically creates a project charterthat contains a description of business needs, the desired deliverables, and aformal approval to proceed by appropriate management. An integrated planoutlines in greater detail the various activities, resource aspects andproposed effort.Figure 10: Adoption Level-Project Planning Parameters

Planning parameters consideredProject Planning ParametersProject ScopeProject BudgetProject Delivery ScheduleProject Management PlanProject Delivery TeamProject Target Benef itsProject Quality ParametersProject Risk Management ..ource: FICc/ Analysis

Current approach to project risk management?

Project Execution: Adoption of Best Practices

To what extent do organizations in India adopt best practices? The primarydriver behind adoption of best practices is improvement. In India, projecteffectiveness is typically a measurement of how projects are progressing interms of cost, time and quality. While these are very worthwhile, metrics areoften the only focus of many measurement processes within most public andprivate organizations. All too often, the effectiveness and relevance of theprocesses around the projects are not reviewed against the type and scale of



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the project. Further to this, a measure of process maturity which will indicatethe level of consistency and control is yet to evolve. Some of the primarymeasures being tracked by organizations in India to improve projectexecution may be grouped under 3 focus areas as represented in table 10.While there is a high adoption-level of the cost and delivery measures, veryfew organizations focus on risks. Nevertheless project risk management is awidely acknowledge area of concern. The general adoption level of bestpractices and benchmarks is low across sectors shown as a part oftableB. 80%ofthe respondents perceive lack of information as the primary reason for lowadoption of best practices and bench marks. In addition, 79% perceive lack oftechnology, another 55% attribute lack oftrained man-power for low level ofadoption.Table 8: Three FocusAreas for Project Delivery Improvement

Measures tracked for projectdelivery improvement

Project Cost PerformanceCost

Return on InvestmentProject Schedule

Medium

PerformanceProject Cycle-Time

Delivery StaffingStrategic Business AlignmentVoice of CustomerKnowledge Management

Risk Risk Management Capability


FocusArea: Cost

High

Low

Adoption level of Best Practicesacross the sectors

Automobile

Project Cost Performance: The Cost Performance Index (CPI) is calculated aspart of the Earned Value Management (EVM) process. It identifies whether aproject is under or over budget. This is applied to individual project tasks aswell as the project as a whole.

Page 146

Sector

DefenceEnergyInfrastructureIT & ITESReal Estate


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Page 147

Return on Investment (ROI): The value that a project brings to theorganization is popular among most organizations in India and is tracked. Ithas been defined as the calculation of the return that undertaking a projectwill give over a specific period of time.

It is perceived that organizations in India are very conscious about theimplications of cost and are trying to adopt many best-practices to keep thecost within limits. Figure 11 indicates some of the strategies that are beingadopted by organizations in India to keep cost under control. 86% perceivethat more than 50% of the projects running/completed are within initialbudget.

Figure 11: Strategies and Best-Practices adopted to Control Cost

80%

OJ c l : J l : J ~ rn >- ~ t:'> 0 u OJ _aU C OJ U -'" OJ, . , g OJ " e . , OJ s:u '" -5 -0~ E c (5'" c OJ Q u . ' i : OJbJl u 0 V . . . . . ~J V i V OJ U OJ OJ . . . . . 0b .o 0 bJl '": OJ OJ V OJ U C ~ -"! c V s:00 ~ '" u 's '" c bJl c '" u 0 u'" 0u ~ 0 c O J z- V i OJ ' 2 .!!!u . , E c -0bJl u U Q V Q OJ . ! : ! 1 -0c OJ OJ '" -0 ~ C" e -0 >- Q _ : : : > '" OJ .80. -0 OJ OJ '" '" '" E '" >_ c : : > Q _ : : : > X -'" V > u 2 .~OJ u 4= l- E u.J e> E ~ . . e ~ Q [" '"J 2 c 0 tr0 c Q >- Q u.J2 bJl -;:: 0 bJlc c '" cu.J 0 u.J U V i....J .2c

Focus Area : De liveryProject Schedule Performance: The Schedule Performance Index (SPI)indicates whether the project is ahead or behind schedule. The StandardDeviation ofSPI indicates abilityto schedule effectively and accurately.



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Project Cycle Time: Most Indian organizations assign an end-date to theprojects and criteria that define a project as complete. However, they arecompromised throughout project life-cycle. A variant to this measure is thelife-cycle costing which is being followed by Indian Defence sector.

Staffing: Morale within the project team is a critical aspect contributing toproject success. The use of a Weighted Employee Satisfaction Survey (WESS)is a measure being adopted by some of the private organizations in India.There are instances where such measures are being monitored at projectlevel as well. A WESS is a mix of hard and soft measures weighted to supporttheir importance as a predictor of employee satisfaction. A typical WESSamong large Indian organizations in weighton corporate climate (pay, growth,supervisor competence)

25% weight on stress indexand work life balance 15% weight on voluntary turnover rate and employee attrition 10% weight on focus group results and work place diversity 5%weight on grieva nce rate 5% weighton absenteeism and transfer rate

The recognition of project management as a valued service within theorganization is also increased when human resources function co-ordinatesthe allocation of project resources.

Strategic Business Alignment: Much of the typical measures focus on theeffectiveness of project management within a project, but few focus on theidentification of the correct projects to work on, which are aligned tocorporate strategic goals. A systematic approach of scoring projects toprioritize them is being adopted by governing planning division to undertakelarge infrastructure projects. This gives an indication that the projects beingworked upon are aligned and integrated with overall national objectives.

Voice of Customer: The private organizations in the automobile, IT-ITES andrea Iestate sector ask customers about their satisfaction level with the projectperformance. The government of India has also developed a service deliveryframework 'Sevottam-Excellence in Service Delivery' which seeks the voice ofcitizens on their experiences while availing government services. However, nosuch initiatives have been developed for non-citizen facing services likedelivery of infrastructure projects.

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Knowledge Management: Organizations in India can build capability throughpost-project harnessing of lessons learned. Such mature practices are visibleonly in the IT-ITESand automobile sector in India.

While most organizations in India track the financial measures through annualreports, there is limited focus on the delivery measures/benchmarks. With afew exceptions, most Indian organizations do not have a centralized source torefer and adhere to specific delivery benchmarks and best practices asdiscussed. Benchmarks are not employed as standard targets in projectexecution; rather they are referred for an intuitive understanding of theproject performance. Continuous improvement through adoption ofbenchmarks is rarely observed with the exception of IT-ITES and automobilesector. Figure 12 indicates the adoption level of various tools to improvedelivery. It is perceived that real-time automated tools can be adopted toimprove delivery scenario.

Figure 12: Perception towards Tools to Improve Project DeliveryResponsibility Matrix

Project RoadMap/ Project PlanStandardized policies and procedures

Financial Management ToolsITTools for tracking Project Schedule

Decision and Knowledge Management ToolResource Management Tool

RiskAssessment and Monitoring ToolCommunication Technology

Documentation Management ToolProject Management Tools

Independent Project Reviews/ AuditsProject Owner/ CEODashboard

61% 35% 3%59% 41%

55% 45%52% 45% 3%

43% 47% 10%38% 55% 7%

37% 56% 8%33% 57% 10%')

31% 66% 3%29% 60% 11%

-26% 55% 19%~"32% 55% 13%

34% 62% 4%38% 54% 9%

56% 43% 1r;JSteering Committee Meetings

Project Reports

IVery Effect ive aScope for Improvement Iineffect iveSource: FICc/ Analysis



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These tools have some level of awareness across all the six sectors. However,the adoption level remains varied. Typically organizations choose thesuitability of these tools. Thereon the applicable tools, methodologies andpractices are adopted. Table 9 indicates various considerations that Indianorganizations stress on to ensure improved delivery. These considerationsmay be adopted at a certain phase of the project or throughout the project lifedepending on its relevance.

Table 9: Adoption of Best PracticesFocusAreaScope

Schedule

Communication

Learning

Procurement

Considerations, Tools and Methodologies used by Indian OrganizationsScope Statement, Change Request, Requirement Analysis, WorkBreakdown Structure, Statement of Work, Activity List, Baseline Plan, Re-Baselining, Product Breakdown Structure, Value AnalysisProject Management software for Task Scheduling and Monitoring, Multi -project Scheduling/Leveling, Gantt Chart, Milestone Planning, Crit ical PathMethod, Network Diagram, Learning Curve, Critical Chain Method andAnalysis

Progress Report, Kick-Off Meeting, Communication Plan, WorkAuthorization, Project Website, Earned Value, Trend Chart or SCurveLessons from closed project, Customer Satisfaction Survey, HistoricalDatabase of Lessons LearnedClient Acceptance Form, Quality Inspection, Quality Plan, Control Charts,Cause and Effect Diagram, Pareto DiagramProject Charter, Responsibility Assignment Matrix, Financial MeasurementTools, Feasibility Study, Configuration Review, Stakeholder Analysis, QualityFunction DeploymentPM Software for Resource Scheduling, Team Member PerformanceAppraisal, Team Building, Focus and Motivation, Resources LevelingTop-Down Estimation, Cost Benefit Analysis, Bottom-Up Estimation,Project Management Software for Monitoring Cost , ParametricEstimation, Life Cycle CostRisk Management Documents, Contingency Plans, Ranking Risk, PERTAnalysis, Decision Tree, Probabilistic duration Estimates (PERT),Simulationlike Monte-Carlo Analysis and soonBid Documents, Bid Seller Evaluation, Bidders Conference, Database ofcontractual commitment data

Page 150


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Focus A rea: R iskRisk Management: Inadequate risk management is a primary cause of concernindicated by most organizations in India. To be in a position to have fully identified allrisks associated with a project and have a response plan for each; that is clearly abenchmark most organizations acknowledge, nevertheless, do little about it. Riskmanagement by its very nature is flawed because it only identifies the things projectmanagers know; it fails to appreciate the "unknown unknowns", the "un-controllable".That said, the more risks identified and planned for, the better position the projectteam is in to deliver a successful project. Risk Management has been identified as a bestpractice by most respondents. Moreover, there is a growing concern amongorganizations about inaccurate risk identification. Respondents indicate a varieddegree of risk management effectiveness in their organizations as indicated in figure13. The effectiveness is seen to va ry over the project life-cycle.

Figure 13: Effectiveness of Risk Management across the Project LifeEffectiveness of Risk Management Practices

Planning and Design,_----~~,------, Execution and Monitoring,_----~~,------, Handover12%

58%

Page 151

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Project Monitoring and ControlThe maturity level of project monitoring and control is clearly divided amongIndian organizations. Organizations having a defined governance framework takeup various initiatives. The functions carried out by the large organizations areperiodic audits, regular status reports, spot checks, accountability reports,exception handling systems among others. Nevertheless monitoring and controlis an ad-hoc activity for small and mid-sized organizations partly due to lack ofawareness and partly because it isviewed asan overhead cost and unnecessary.The most common and universal criteria attributed to project management andits success in India is whether the project is on time, within the budget, hasdelivered targeted benefits, and/or it has met quality standards with limitedchange in project scope. Most organizations do not have a structured approach toassess project success by grouping the criteria into categories namely internalproject objectives (efficiency during the project accounting for its time and cost),benefit to customer (effectiveness in terms of expected quality and objectives)and its benefits over short, medium and long term. Mid-sized and smallorganizations in India have lack of awareness and identified weak monitoring andcontrol as primary reason for project delays.

The involvement of senior management in project reviews enables effectivemonitoring and control. Their involvement is however varied across the sectorsas shown in f igure 14. It is perceived that reviews involving senior managersinfluence adoption of best practices. It is also observed the involvement of seniorleaders have developed a centralized function for monitoring and control in mostorganizations. The typical expectations of senior leaders from a centralizedgovernance function are also indicated infigure 14.

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Figure 14: Senior Leaders Influence Adoption of Centralized Governance FunctionInvolvement Level ofSenior Leaders inProject Reviews

Real Estate 75Overall 92

Source: FICc/ Research

Expectations form a Centralized Governance Function83%~ 68%~ 60% 58%~ ~ 50%~ 45%~ 27%

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Program Management Office (PMO) in IndiaPMO as a distinct function operates in most large organizations in India. PMOfunction is perceived as an overhead cost by most small and mid-sizedorganizations. The scope of functions being performed by the PMOinvestigated and studied indicated 38 common functions in five specificcategories. The responses indicate that PMOs are diverse in their overallscope of services as indicated in table 10.



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Page 15 4

Table 10: Scope of PMO ServicesWork and Resource Management

Program/ Portfolio Ma

Scope Management

nagement I Ipment

I Capacity Mgmt. =anagement I I

PM Train ing and Develo

Issue ManagementInternal ConsultingRisk ManagementStaffing/OrganizationaCentralized Demand MStrategic Management

Facil itate Strategic PlanningAdministrate Business PlanningBenef it Management RealizationUndertake Investment Portfolio AnalysisForm Board Steering Commit tee

Process Management

Process Improvem

Process Metrics

ent I Ipesignn

Process OwnershiBusiness Process DProcess AutomatioProcess Audits

85I

7156

55

54

5350

33I

68

40

34

32

82I

65

54464542


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Ser vi ce Mana gemen t

Change Management I I 55 IIT Service Portfolio Management 49Application Portfolio Management 49Problem Management 36Release Management 33Enterprise Standards 23Vendor management 21Asset Management I I 12 IGeneral Bus iness Management

Dashboard/ HighKnowledge ManaBudgetingBusiness LiaisonNPD/ Product LifeStaff DevelopmenFinancial ManageBusiness PerformContract ManageCollaborationCost Recovery

Level Reportinggement

-Cycle Managementtmentance Analyticsment

7847

40

40

3736322726

About 80% of industry leaders have centralized function to monitor andcontrol project execution. However, the maturity and capability ofgovernance varies across sectors.

2317

82% perceive that PMO enables process improvement by rigorous monitoringand control.



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78% of the PMOs are involved in monitoring and control of projects, theyprepare dashboard and facilitate high-level reporting on projectperformance.

71% of the respondents acknowledge PMO's role in project managementtraining and organizational capability development.

Project ClosureProjects in India usually have a clearly defined last stage - a bridge opens forpublic use, a product launches, and new software rolls-out, or a defenceweapon is procured. The steps needed to formalize the project's acceptanceare sometimes called the project closure process. This process evaluateswhether the project has delivered the required outcome, and that thestakeholder expectations have been met. Project closure has many differentelements, and the best way to carry out a closure is to plan for itfrom th

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