Project Management Software Small Business Buyer Report – 2015

Every year, hundreds of small-business buyers—those from companies with $50 million or less in annual revenue—contact Software Advice in search of solutions for project management (PM). These interactions are a valuable source of information about emerging trends for small businesses within the PM marketplace.

We analyzed a random sample of consultations from the past year to better understand project management software buyer trends, including the top pain points and primary purchase drivers of small-business buyers, as well as the functionality they seek.

This report, which highlights our findings, can guide future buyers in their search for PM solutions.

Key Findings

  1. The number of buyers looking to purchase PM software for the first time has increased 14 percent since 2014, suggesting that buyers are increasingly finding manual methods insufficient for managing projects.
  2. Purchase drivers for first-time buyers include improving organization (54 percent) and increasing automation (48 percent), while most buyers replacing existing software are doing so because they’ve outgrown their current system (53 percent).
  3. An increasing number of buyers are seeking software with reporting and analytics capabilities (88 percent) over solutions with only basic functionality, such as time tracking (83 percent) and task management (79 percent).


Introduction

The Project Management Institute (PMI) declares in its 2015 Pulse of the Profession report that “All change in an organization happens through projects and programs.” Businesses are therefore better able to meet strategic goals when they have a system in place for effectively managing projects.

When projects are managed poorly, however, businesses risk the loss of millions of dollars: In the same report, PMI states that, on average, over $100 million is wasted for every $1 billion invested in projects. What’s more, a Harvard Business Review investigation found that one in six information technology (IT) projects had an average cost overrun of 200 percent and schedule overrun of nearly 70 percent.

With so much at risk, a growing number of businesses are deploying software to assist them at critical stages throughout the project life cycle:

The Project Management Life Cycle

The Project Management Life Cycle

To help these buyers, Software Advice set out to examine the current PM software market, determining trends among small-business buyers and comparing them with last year’s findings.

60% of Prospective Buyers Currently Using Manual Methods

When asked about their current methods for managing projects, roughly one-third of the prospective buyers in our sample, combined, say they are using PM software in some capacity: either on its own (17 percent), with an additional PM software tool (6 percent) or in combination with manual methods (9 percent).

However, the majority of buyers (60 percent) are managing projects using manual methods, such as email, spreadsheets and/or office management suites (e.g., Microsoft Office or Google Drive).

Compared with our data from 2014, this year’s findings show a 14 percent increase in the number of prospective buyers looking to purchase PM software for the first time. The number of buyers looking to replace existing PM tools has remained roughly the same, at 35 percent (though in this year’s analysis, we’ve separated those buyers out into more specific categories).

Prospective Buyers’ Current Methods

Prospective Buyers’ Current Methods

As this study is focused solely on small businesses, which typically have smaller budgets to spend on software, it makes sense that the majority are using manual methods.

Andrew Makar is an IT consultant and the author of industry blog Tactical Project Management. He explains that, at small businesses in particular, PM typically falls under the charge of IT departments that track workflows and statuses with spreadsheets rather than PM software.

However, IT resources of time, budget and personnel quickly become burdened when trying to balance new projects on top of current day-to-day operations.

By separating the roles of project manager and IT manager, Makar says, each can focus their time and efforts more directly on the separate functions of new project development and day-to-day operations—increasing the chances of project success.

Kiron Bondale is a project and change management professional, PM blogger and frequent contributor at ProjectTimes.com (an online resource for PM professionals).

An important consideration for first-time PM software buyers, Bondale says, is that they can’t buy a product and expect it to manage itself—they also need to invest in some degree of support for it. In most organizations, the business unit that supports project managers, handles administrative PM tasks and/or oversees project processes is called a project management office (PMO).

PM Solutions, a research and services firm, reports in its 2014 State of the PMO study that companies of all sizes are implementing such offices: 61 percent of small businesses have PMOs in place (compared to 90 percent of large businesses).

What’s more, 30 percent of the total sample without a PMO plan on implementing one within the next year. While PMOs can vary in size and function depending on the size of the business, they add significant value to an organization and can help it to mature in project management (more on this later).

First-Time Buyers Seek Organization and Automation

Due to the large number of prospective buyers looking to transition from manual PM methods to software, we looked at their pain points, or purchase drivers, separately from those of buyers replacing an existing system.

The top reasons driving buyers to consider PM solutions for the first time include the need to:

  • Improve organization (54%)
  • Automate processes, such as task management and time tracking (48%)
  • Increase transparency of project statuses and updates (45%)

Top Reasons for Evaluating New Software for the First Time

Top Reasons for Evaluating New Software for the First Time

Basic PM software solutions can help address most first-time buyers’ top pain points: Not only can they help buyers get organized, they can also streamline workflows and help increase worker productivity. However, Bondale stresses the importance of outlining and clearly defining basic processes before introducing software to ensure that project protocols and objectives are consistent ahead of time.

Without clear definitions and established processes, “it’s probably premature to look at bringing a solution in, because it’s just going to automate chaos,” Bondale explains.

An example of a basic practice that should be standardized before implementing software is the project health check (PHC): a review process aimed at detecting trouble and making corrections early on to increase the likelihood of success.

Many businesses utilize a color system to represent project status during PHCs, where projects are flagged green if they are healthy, yellow if they are in danger and red if they are failing.

The more clear, standardized and consistent an organization’s PM processes are (and the less it relies on manual methods), the more “mature” the organization. And PM maturity is a primary determinant of project success—particularly as project size and scope begins to scale.

PM maturity typically progresses over five levels (from least to most mature):

Project Management Maturity

PM Maturity

The first-time buyers in our sample can most likely be identified as “level two,” in which standard processes have been established and are repeatable across projects. PM software can be a useful tool in deploying these processes across an organization and helping management institutionalize them—allowing the business to graduate from level two to level three.

Small-business buyers who don’t have a huge budget to spend on their first PM software solution may want to consider Web-based tools offered on a subscription basis.

The subscription fee covers the cost of the software license as well as maintenance and upgrades (support may come with an additional fee). Conversely, traditional, on-premise solutions tend to come with a hefty upfront licensing fee in addition to fees for maintenance, support and upgrades.

Outgrowing System Is Top Purchase Driver for Buyers

The majority of buyers looking to replace their current system say they are doing so because they’ve outgrown it (53 percent). The needs to centralize and/or consolidate data and to find a more user-friendly system tie for a relatively distant second, each cited by 29 percent of buyers.

Top Reasons for Replacing Existing Software

Top Reasons for Replacing Existing Software

Typically, “outgrowing” a system doesn’t refer solely to a business growing in size, Makar explains. Rather, it usually refers to project needs outgrowing the capabilities of basic PM applications.

Moving from general, day-to-day workflow management to strategic project and portfolio planning requires a deeper understanding of resources, project constraints and dependencies, Makar continues. This often requires complex functionality beyond what is offered in basic PM solutions.

One type of advanced functionality these buyers frequently request is resource management, which allows users to allocate personnel to projects based on their expertise as well as their availability. This is key when planning and staffing future projects, says Makar.

The availability of crucial individuals can dictate project timelines, the start of additional projects and/or the decision to hire contract talent if projects have to start immediately.

Most software vendors offer their products in three different versions, or tiers, which can be helpful for buyers who feel they’ve outgrown their current systems:

⇒ Basic tier: Priced modestly for a handful of users, and is generally focused on team collaboration, project visibility and task management.

⇒ Midrange tier: Designed to handle an average number of users and offers greater functionality, such as reporting and project analytics.

⇒ Upper tier: Aimed at large teams and complex projects, featuring complex functionality, larger storage and more integrations.

Finally, to shed light on the second and third reasons for replacing PM software, we can refer back to the chart on prospective buyers’ current methods. Nearly half of all buyers replacing software currently use either multiple PM tools, or PM tools along with manual methods. It thus makes sense that they are looking to simplify their methods and consolidate PM into one centralized hub.

More Buyers Request Advanced Functionality Than Basic

In last year’s report, the top functionality requested by buyers was time tracking and task management (in addition to “project management” itself, which was requested by most).

Interestingly, this year, buyers request more advanced reporting and analytics functionality (88 percent) over the basic capabilities of time- and task-tracking (83 and 79 percent, respectively).

Top-Requested PM Functionality
Top-Requested Reporting and Analytics Functionality
Top-Requested Project Planning Functionality

In the initial chart, “Top-Requested PM Functionality” above, we’ve grouped functionality that helps users visualize project status and performance together under the “reporting and analytics” category. The next chart, “Top Requested Reporting and Analytics Functionality,” then details each functionality individually.

This year’s data reflects a 13 percent increase in the number of buyers requesting reporting: from 35 percent in 2014 to 48 percent in 2015. Clearly, more buyers are realizing the benefits this functionality can bring.

The ability to generate reports allows managers to measure project success by evaluating key performance indicators (KPIs), such as profit margins and return on investment (ROI). Reports provide a snapshot of how accurately teams are meeting established budgets, timelines and milestones throughout a project’s life cycle—allowing businesses to take proactive measures to avoid risks and correct potential issues.

And, ultimately, reporting can help businesses monitor success and value added in terms of how a project’s expected benefits measure up to actual gains.

However, Bondale notes that buyers should only choose software with advanced functionality that is a good fit for both their organization’s maturity level and culture. Don’t be swayed by a particular dashboard or application that is hyped at a trade show or that demos well or make a purchase decision without understanding whether that solution is really the right fit, he warns.

The differences between basic and more advanced PM systems break down into two areas, Bondale explains: the richness and depth of functionality, and the overall scalability of the solution.

“A highly mature PM culture and organizational capability will be well-matched with a sophisticated PM tool suite. Outside of organizations [that] are at high levels of organizational PM maturity or are doing projects as their main source of revenue, most companies could get by with lower-end solutions.”

Kiron Bondale, ProjectTimes.com

Bondale notes that businesses that have projects as their main source of revenue should have a PM solution with advanced automation, reporting and forecasting.

Additionally, businesses in some industries are more likely to need a dedicated PM solution than others: specifically, technology, construction and engineering. According to Bondale, many technology firms use these tools not just for PM, but for systems design as well as the entire software development life cycle.

In construction and engineering, firms use PM tools to provide the detailed forecasting, planning and scheduling required for the large-scale projects common in these industries.

These findings are borne out by the demographics of the buyers sampled for our report (see “Demographics” section below).

Conclusions

Based on the results of our research, prospective PM software buyers should consider the following before making a purchase decision:

⇒ PM maturity: Establish basic processes before investing in software. PM software can be a useful tool, but only once PM processes—such as setting timelines and building schedules —have been defined, established and followed. Otherwise, as Bondale says, businesses will just be automating chaos.

⇒ PM support: Institute a PMO. Businesses are advised to treat PM as a core competency and take steps to provide dedicated support for project managers, processes and software within the organization. This is most often accomplished by implementing a PMO.

⇒ PM tools: Consider basic versus advanced functionality. Small-business buyers should choose software that closely aligns with their organization’s PM maturity. For maturity levels one and two (listed above), a basic solution may be a good fit. However, if the business is closer to a level three and/or has projects closely tied to profit margins, it should invest in software with more advanced resource management and reporting capabilities.

Demographics

Of the buyers we sampled, the industries with the greatest representation are IT services (which includes software/technology and Web design/development) and engineering/manufacturing, each with 18 percent.

We also looked at the job title groups for the buyers in our sample: the largest percentage are senior executives or owners, while an additional 15 percent are in management positions. These findings are consistent with last year’s study.

By Industry: Prospective Buyers
By Job Title: Prospective Buyers

The majority of small-business buyers in our sample are from businesses with $5 million or less in annual revenue (84 percent, combined) and have between 11 to 50 employees (70 percent, combined). Additionally, the majority of buyers sampled are looking to purchase software for between two and 10 users (a combined 59 percent).

By Annual Revenue: Prospective Buyer Size
By Number of Employees: Prospective Buyer Size
By Number of Users: Prospective Buyer Size

The detailed methodology for this report can be found here.

If you have comments or would like to obtain access to any of the charts above, please contact eileen@softwareadvice.com.

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