Learn More About Capital Project Management Software
What is Capital Project Management?
Capital project management software helps companies define, implement, and monitor significant investments in infrastructure such as manufacturing facilities, warehouses, roads, or airports.
Capital projects are much more complex than a typical project that a professional services company may deliver, such as a marketing campaign. In fact, a capital project comprises dozens or hundreds of smaller projects, each with specific tasks for each phase of the project, from design and planning to execution and maintenance. Capital projects also involve many employees, contractors, suppliers, and consultants. Finally, these projects must comply with local and global sustainability standards, such as environmental protection and worker safety.
It is, therefore, critical for capital-intensive companies to use a management system that helps with the automation of all the tasks and activities related to capital projects.
What Types of Capital Project Management Exist?
Capital project management solutions have similar features to standard project management solutions but can be differentiated based on the delivery model of the software.
Software as a service (SaaS)
Cloud computing or SaaS is now the primary delivery model for this type of software. This means buyers don't need to worry about hardware and IT personnel to manage the software and its database on their premises.
On-premises
Traditional capital project management software used to be stored and managed by buyers on their premises. Since some of these companies invested heavily in customizations, they may prefer to keep their legacy solutions. Also, new customers may opt for this delivery model to have more control over the software and the data.
Hybrid
In some cases, companies may need to combine cloud or SaaS software with on-premises solutions. Some capital project management vendors offer both options so their customers can use either. The main benefit of the hybrid model is that buyers don't need to replace all their on-premises solutions, which can be a long and complicated process. Instead, they can gradually move parts of their software ecosystem from on-premises to the cloud.
What are the Common Features of Capital Project Management?
The following are the core features of a capital project management solution that can help users at every stage of the project:
Project and portfolio management: As mentioned above, a capital project is a mix of many smaller projects, which can be grouped in portfolios. While project owners focus exclusively on their projects, portfolio managers need functionalities to define and implement portfolios. Features such as project controls are also required at the portfolio level. Furthermore, resources can be shared, and costs must be monitored across projects and portfolios.
Capital planning: Capital projects need to be reviewed and approved before being implemented, which can be done using the capital planning module. Users can start working on project planning and the workflows needed to perform tasks only when the overall project is approved.
Project cost management: Capital projects are costly, so companies must track their costs or capital expenditures (CapEx) accurately. Capital project management software helps businesses with cost forecasting, which is used to create a budget for the project, usually referred to as capital budgeting. The estimated costs calculated through forecasting are compared with the actual costs when the project is implemented.
Program management: Capital programs refer to project portfolio groups that can be managed together because they have similar resources and stakeholders. For instance, a program manager may oversee all construction project portfolios, from definition to implementation and closeout. Program management functionality can also be used to align portfolios and projects with the company's overall strategy and business objectives.
Procurement: Purchasing features help companies identify and buy all the resources and components required to deliver a capital project, from building materials to equipment and sometimes professional services. This module also helps find the best providers for each resource type.
Resource management: Each capital project requires significant human and material resources. The project team uses capital project management software for resource allocation at each stage. Allocation is based on the project schedules created using the project and portfolio management module. Resource allocation should be updated in real-time to avoid delays and disruptions when a project changes.
Work order management: After a capital project is created and resources are allocated, supervisors need to assign work to employees based on their availability and qualifications. Predefined workflows help users create work orders for standard operations, but many activities can be specific to an industry or a client. For instance, conducting a land survey can be entirely different for a retailer building a new warehouse and for an oil and gas company.
Project information and document management: Large portfolios of projects require much information about deliverables such as warehouses or production facilities, including details on their technical specifications, maintenance instructions, or safety measures. Document management is also used to create templates such as contracts or statements of work.
What are the Benefits of Capital Project Management?
This software allows for better definition, deployment, and monitoring of capital projects.
Streamline capital project lifecycle: Since capital projects can be complex and may require years to be completed, companies must track all the project stages, from definition and scoping to implementation and through the final delivery. The process may involve hundreds of internal and external people and thousands of interdependent tasks.
Track costs and profitability: Capital project costs can be very high, which means that the project's price needs to be even higher so that the company achieves profitability. Capital project management solutions can help minimize costs, which improves profit.
Improve resource allocation and employee productivity: Since resources represent a significant component of any capital project, managing them can significantly impact its performance.
Who Uses Capital Project Management?
This type of software can be used by anyone involved in capital project management, but it mainly benefits the following personas:
Project management office (PMO): The PMO represents the project managers involved in defining and planning every stage of each project. In addition, the PMO group implements and monitors projects and ensures that project management standards and best practices are implemented across the company.
Portfolio and program managers: These users are in charge of project governance, which means they oversee the overall activities at a high level and rely on project managers to identify and address issues that may impact delivery.
Supervisors and team leaders: Supervisors are the ones who implement the tasks defined by project managers. They are in charge of resource management and creating and tracking work orders.
Accountants: Accounting professionals use this software to track project costs and expenditures and ensure that the company is profitable. Accountants are also involved in cost forecasting and budgeting for new projects.
What are the Alternatives to Capital Project Management?
Alternatives to capital project management software can replace this type of software, either wholly or partially:
Project-based ERP software: Project-based ERP systems can also be used to manage capital projects. However, their functionality for large projects is less robust than capital project management software. Project-based ERP provides back office and front office features such as accounting and sales, which are not included in capital project management solutions.
Construction project management software: Construction companies may replace capital project management software with project management solutions designed specifically for their industry.
Software Related to Capital Project Management
Related solutions that can be used together with capital project management include:
Project cost management software: As the name implies, this type of software focuses exclusively on tracking project costs. While it can't replace capital project management software, it can complement it, especially when the former doesn't have robust cost management functionality.
Construction management software: While this software is designed for the construction industry, it can also be used in related industries such as real estate.
Project and portfolio management (PPM) software: This type of software helps companies manage portfolios of projects but doesn't always include advanced functionality for cost management, resource allocation, or work order management.
Asset management software: Fixed assets such as property, plant, and equipment (PP&E)
are critical to any capital project because of the equipment and machinery used to build a facility or a bridge. Also, facilities management functionality can be used to manage construction sites.
Building information management (BIM) software: BIM is used to design buildings, facilities, or infrastructure projects. The final designs are used as a starting point for capital projects, which is why the two solutions are used together.
Challenges with Capital Project Management
Capital project management software solutions can come with challenges, as listed below:
Complexity: Since capital projects can be complex and expensive, the software used to manage them may also be complicated to use. For instance, many features are required to handle all tasks at each project stage. Also, many employees and external workers are involved, and they may need access to different parts of the system.
Cost of ownership: Capital project management software can be expensive and require extensive customization depending on the buyer's industry. Other than high initial costs, maintaining the system may require qualified personnel or additional vendor services.
Which Companies Should Buy Capital Project Management?
Companies buy this type of software when they have outgrown legacy systems, spreadsheets, and other software solutions that don't provide robust functionality for capital projects.
Asset-intensive companies: Manufacturers or large retailers need to build and maintain facilities and sophisticated machinery or equipment such as an industrial furnace or the conveyor belt system of a distribution center.
Governments and public sector: Large infrastructure projects can only be managed using capital project management, making this software critical for any government agency involved in such projects.
Consultants: Professional services companies use this type of software to deploy and manage large projects on behalf of their customers. For instance, a retail company may outsource the project to an external consultant instead of building a distribution center.
How to Buy Capital Project Management
Requirements Gathering (RFI/RFP) for Capital Project Management
Since creating an RFI for complex software can be a daunting initiative, buyers should try to focus on the essential and critical features they need in a capital project management solution. For instance, resource management is crucial, while a chat tool may be less vital.
Compare Capital Project Management Products
Create a long list
A long list can be created by choosing solutions based on criteria specific to the buyer. For instance, the cloud delivery model may be a deal breaker for companies that don't want to invest in IT.
Create a short list
The short list is the result of eliminating most alternatives to keep two or three finalists. Since the products on the long list usually provide similar functionality, the criteria to create a short list need to be more specific. For example, vendors can be eliminated if they don't have extensive experience and expertise in the buyer's industry.
Conduct demos
Demos should be used to further differentiate between products. For this purpose, they should be detailed enough to show critical features such as project planning but not too complicated to confuse buyers.
Ideally, demos should follow a script created by the buyer which simulates its daily operations, from program and project definition and review to project and task implementation and project closing.
Selection of Capital Project Management
Choose a selection team
The selection team should include the key employees involved in capital project management, such as program and portfolio managers, project managers, supervisors, accountants, and executives. Since capital projects may include hundreds of users, it isn't realistic to involve everyone, but they should be allowed to provide feedback and voice concerns.
Negotiation
While negotiations tend to focus on the software's pricing, buyers should consider the solution's return on investment (ROI). The initial cost of capital project management can be high, but this type of software can also bring substantial cost savings and productivity gains in the medium and long term. More affordable software may be tempting, but it usually doesn't provide robust features, and its ROI may not be higher.
Final decision
The final decision should include all stakeholders, financial controllers, and CFOs. Other than the software and the services delivered by the vendor, buyers should ensure that the contract contains a detailed plan of the implementation, information on software security and compliance, and service level agreements.
Capital Project Management Trends
Market consolidation
The complexity of the software makes it difficult to develop, which explains why most players are medium and large vendors. For this reason, vendors often choose to combine forces through mergers and acquisitions.
Vertical specialization
Vendors tend to specialize in specific industry sectors with different capital project management requirements. For instance, manufacturing companies need functionality to manage the construction of plants or warehouses, while utilities companies may need features for linear assets such as power lines.
