Trading Paces

Janis Rizzuto

Janis is an award-winning journalist and editor who has covered many industries beyond project management, including health care, financial services, higher education and retail sales.

Only days after the year’s budget was completed, an acquisition by Chicago Mercantile Exchange forced its technology division to shift on the fly. A recently implemented portfolio management structure helped the largest U.S. futures exchange quickly reprioritize 300 projects and integrate acquisition-related ones with financial clarity.

It was the 6th of January 2004 — simultaneously a day of infamy and opportunity for the technology division at the Chicago Mercantile Exchange. "I remember that date well," says Carl Stumpf, director and technology controller, with an edge of irony in his voice. "Budgeting had been done for five days, when a major acquisition was announced."


CME, the largest futures exchange in the United States, was buying Liquidity Direct Technology, the maker of an electronic trading platform.


"As a result of the acquisition, we had a series of major projects that impacted just about every aspect of the technology division," says Mark Bennett, associate director of project financial controls. "We were given some incremental dollars associated with the acquisition, but not enough to cover the whole cost."


The infamy: Shuffle 300 other projects that were just approved to get the integration of the acquired company platform done as soon as possible.


The opportunity: Use the new project portfolio management tool that just helped streamline the planning and budgeting process to make it happen.


"One of the key enablers to seeing how everything was going to shift was the fact that we had all the information and detail in the portfolio management tool — Artemis 7," Bennett says. "We could drop things in and see for example, what the impact was on resource loading and see how to apply the incremental budget."


Another key benefit of the tool was the ability to give financial information to executives. "Because we are a public company, we had a short time window by which we had to explain the total impact of the new projects on the financials," Stumpf says. "Portfolio management helped me meet my obligation to shareholders and execute my objective to give a reliable and accurate data."


By August 2004, the technology department completed work on the product of the acquisition, the Enhanced Options System, delivering a major competitive advantage.


Both Stumpf and Bennett attribute part of CME’s success to their ability to integrate acquisition-related projects into the portfolio quickly, clearly and with financial clarity. Their performance earned an IT Financial Management Excellence Award for "Best IT Project Portfolio Management Structure," presented in March by the IT Financial Management Institute. The awards are designed to honor IT financial managers for their best practices.


Pain, Then Gain

Things weren’t always this good. There was a significant amount of difficulty in the preceding years as Stumpf and Bennett tried to keep up with the moves of the lightening-fast futures industry. "We had to do manual collection of cost estimates and scope data, and it was in a lot of different formats, prioritized in a lot of different ways," Bennett says. "The management team was trying to make decisions on which projects to do and not do, and they wanted quick turnaround times. But putting the stuff together and giving the ‘what if’ scenarios was very time consuming, manually intensive and subject to human data-entry errors. It was a cumbersome process and difficult to sort these things on the fly."


That’s what sent the pair searching for a tool to help, eventually selecting and implementing Artemis in late 2003. The significant spending on IT demanded a better way. CME has spent $1 billion on technology in the past 8 years, according to company reports. "That’s a huge investment," Stumpf says, "and our work with Artemis plays a huge role with spending that kind of money."


CME’s total technology division project roster each year is around 300, with 30-40 large-scale projects and the rest midsize or small, Bennett says. This includes new development as well as infrastructure support. Five hundred employees and 120 consultants deliver the work.


Best Practices

The award-winning project portfolio management structure offers several advantages, according to Stumpf and Bennett. Here are the positive practices it inspires:


1. Better Data Faster for Sponsors

"We have a sponsor-based budget," Stumpf says. "We don’t just support PCs and work behind the scenes; we develop critical technology for the exchange that leads to our competitive advantage. So it is imperative that we understand what management requires and ensure that our projects are in line with their priorities."


The portfolio management process provides transparency for sponsors, Bennett says. "The process empowers the sponsors to understand what’s going on with our projects and enables them to make more effective decisions. Invariably, in the middle of the year, we reprioritize because they want to drop in something new. And unless it involves additional budget, they have some tough choices. This gives them a tool to make the decisions effectively."


2. Decreased Time to Market

"When managers request a new project, we can turn it around with different analysis and prioritizations in a matter of days--without having to shuffle papers," Stumpf says. The shorter analysis process gets projects moving faster toward reality.


3. Centralized, Enhanced Project Information

Over time, the useful data captured in Artemis 7 has grown, which increases CME’s ability to more closely manage its portfolio. "It used to be just scope and cost and prioritization info," Bennett says. "Now we capture qualitative information, including the project description, risks and issues, high-level business objectives, and strategic estimates."


4. Freedom for Project Managers

The tool enables project managers to concentrate on the project at hand--not data gathering and distribution. "Rather than having project managers develop their own financial formats or spreadsheets, we use one version of the truth," Stumpf says. "There is great efficiency in using common assumptions and a tool that’s visible to everybody through the Web. Project managers can then focus on satisfying customers and accomplishing the objectives."


5. Actual Cost Tracking

Bennett is proud of the fact that CME tracks its actual project expenses against estimates. It gives project managers clarity of vision about where they stand financially on their projects and informs future decisions.


"From my background as a project manager, it was a very difficult process to obtain financial information for what I’d spent to date on my project compared with what my budget was," Stumpf says. "But all that information is captured in this tool."


6. More Fiscal Awareness

"Over the past few years, fiscal awareness on the part of project mangers has improved fairly dramatically," Bennett says. "Their understanding of scope changes from a financial point of view is better. With the tool, they now see in a tangible way that if they use more consultants or more staff, there is an impact in almost real time."


In essence, the project portfolio process puts responsibility on the project manager for balancing the project "checkbook" that represents the budget dollars vs. spending.


Adds Stumpf: "Project managers need to continually recognize that they have a responsibility to the executives of the company to explain what they are doing and its financial impact. They forget the big picture when they are working on a technical project. [Portfolio management] reinforces it."


7. Improved Future Estimates

CME is building up historical data in the system to use to boost the quality of estimates on new projects. "As we’ve had big projects come in, we turn to the original estimating templates plus the experience we’ve had, to refine the quality of future estimates," Stumpf says. "A lot of the technology we are developing is cutting edge--it’s not like building a house, which has been built hundreds of times before. We have custom technology, complex interactions among systems and a complicated trading market, so we continually focus on the accuracy of our estimates."


Work in Progress

Of course, all these advantages didn’t come overnight. Bennett says there were some missteps early on in trying to format the information for various audiences. He advises other IT managers to carefully consider how to meet the data needs of different constituents (project managers and executive managers) and how to integrate connected information systems, such as financial programs.


Next, Bennett advises others to start small to demonstrate value through piloted, phased deployment. When he put information in front of managers, he was sure to tell them where the data was coming from, doing a subtle sales job that lead to easier approval for full deployment of the tool.


Overall, project portfolio management helps CME keep up with the frenzied pace of change in the futures market. "We are continually reprioritizing what we do on a quarterly timeframe in response to competitive threats and opportunities," Stumpf says. Adds Bennett: "We are always looking at functionality, looking at the scope of our different releases, to position ourselves for where we want to go down the road."


The latest destination on that road: a partnership with global investment firm Goldman Sachs to enhance the auctions for economic derivatives. These derivatives allow investors to either hedge or take market risk associated with the release of economic indicators. The new partnership, which will operate as CME Auction Markets, is expected to broaden access to the economic derivatives market. 


The news was announced June 28, 2005, and it has Stumpf and Bennett feeling déjà vu. Projects will be reprioritized to accommodate the significant new initiative, but they are ready with a portfolio management process to guide them through.


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