Jonathan Walsh

Reshaping the Business of the IT enterprise PMO at Merck Shifting to value-based portfolio investing Jonathan Walsh Merck & Co., Inc.

2015 NA PPM & IT Governance Summit Dallas, TX June 1, 2015

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Merck & Co., Inc. Profile

Global healthcare company • ~ 70,000 employees • Headquarters in Kenilworth, NJ

Pharmaceuticals Animal Health Vaccines • 2014 Revenue $42 billion

Global IT organization Clark Golestani – global CIO, EVP Hubs in Branchburg, Prague, Singapore Global ePMO within OCIO • Governs IT investment portfolio • IT Benchmarking • Technology Business Mgmt.

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• Large global organization

operating on divisional islands

• Need to plan and execute a

portfolio in the same way

• Adopt PPM Toolset (time,

money, people)

2011-12 2015+

Standardizing PPM

Becoming investors

• Adopt a common $ vocabulary

• Strategy and Value to drive

investments

• Cost Transparency and Value

Showback (TBM)

Realizing Value

• Measuring success (KPIs)

• Becoming more nimble

• Going beyond IT

2013-14

Reshaping an IT organization

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Before 2011, 7 IT divisions operated autonomously. No easy answers at the aggregate level:

• How much do we spend on Portfolio and Operations? • How many projects? • How are we performing?

Merck, in partnership with UMT, established a vision

to “federate” their IT divisions to bring about: • Visibility into 100% of the portfolio demand and budget • Streamline and standardize planning and execution

• Unify Project Scheduling, Resource Management, and Financial Management

• Microsoft Project Server + UMT Project Essentials (One instance globally)

Standardizing the Portfolio Approach

“One source of the truth”

Data Completeness, then Data Quality… Adoption was everything

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New questions to answer easier and consistently: • Are we investing our IT dollars the right way?

• Executing on the strategy? value driving the portfolio? • Are the investments we make successful? (improving

business performance? ROI?) • Do we have full line of sight to our total IT budget? • Are we making information-based decisions?

• What data do you need? How to categorize it? How to calculate costs?

• KPIs? Benchmarks?

Where we started in 2013:

Becoming Investors…and a business

• 25% of our IT programs had business cases

• 6% of our business cases show fully-loaded cost

• Only 8% of IT Programs had measurable KPIs documented in a business case

• 3% of our IT programs had tracked and verified value back to the company

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Anchored in the IT Strategy and IT Economic Model…

...using a common portfolio investment process

...decisions being made at the right levels…

Enabled by the adoption of ….

-A consistent prioritization mechanism for all demand

-Standardized business cases to express value and drive portfolio selection

-Cost transparency and benchmarking

-Encapsulated in our Enterprise Program and Project Management toolset

Revised vision in 2013: Value-based IT

Toolsets were key to making it real

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Strategy Planning

Investment and Operations Planning

Budgeting & Prioritization

Program Management

Execution

Operations and Value Realization

Roadmaps and Investment Plans

Portfolio and Business Cases

Prioritized Portfolios and Budgets

Program Delivered

Measured Value and Strategy Realized

IT Economic Model

• Strategy driving investment prospects

• Value (business cases) driving investment selection

• Common investment language with the IT Economic Model

• Transparency into the whole IT budget (TBM)

• Consistent execution • Decisions and

Transactions are the right altitudes

• Measure Value realized

Standardize portfolio investment process IT Economic Cycle

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PPM Capability model and roadmap A capability Maturity Analysis in 2013 resulted in the creation of a 2-year roadmap for Merck. First focus on planning and prioritization, and resource management. Then improve program execution beyond 2014.

Maximizing utilization

Managing resource assignments and

overcoming conflicts

Understanding resource demand

Resource Management Planning & Prioritization

Standard Business

Case

Accountability and

traceability

Prioritization Model

Data collection

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Outcomes to Date

Right-sized Portfolio Function • One PPM toolset • One portfolio process • Collapsed divisional PMOs into one ePMO • Data-driven decisions making replaced manual reports

Visibility into IT Portfolio and Budget • Everyone can see everything • Cost transparency with TBM (data quality improving) • ~100% investments with business cases, fully-loaded costs, value metrics

Governance and People • Decision rights at the right level • Engaged sponsors • One prioritization framework • Operating at the right altitudes • Thinking and talking value now

Forecasting and Performance • Ability to forecast resource demand and capacity • Consistent financial mgmt. • Consistent scheduling and milestone tracking

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Continue to measure actual benefits vs. projected (Finance is driving this)

Aspire to expand capabilities beyond IT and help drive standardization of value realization leveraging Microsoft Project Server 2013 and UMT 360

Realizing Value and beyond

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Human Success Factors

Conviction of Leadership

Adoption from the beginning

Make them Famous

Don’t over engineer

Data completeness

Active sponsorship

If it won’t stick then do it differently

Make your most difficult opponents part of the team

Not too stringent It will evolve. Work fast.

Data quality as the organization matures