How small businesses are looking at project management

At the end of 2014, there were around 5.7 million small businesses in the US that employed around 55 million people (Source: Fundivo)

According to the State of Small Business survey conducted by Inc.com, more than 57% of survey respondents, drawn from the Inc. 5000 universe of America’s fastest-growing companies, rating their business prospects as “excellent,” versus 38 percent in 2013. The percentage who see their company’s 12-month outlook as average or poor fell from 16 percent to just 8 percent (Source: Inc.com).

Extrapolate these numbers to a global scale and you get an indication of the significance of small businesses. This is the new age of entrepreneurship with strong start-up ecosystems and big investments coming in.

Project management in small businesses

Since small businesses work with fewer resources in a more unstructured environment, they rely mainly on speed, agility, and efficiency to be effective. A strong project management disciple, therefore, can make a world of a difference; the difference between growing exponentially and shutting shop.

Software Advice recently conducted a research – Project management software buying trends in small businesses 2015. Their objective of the study was to examine the current PM software market, determining trends among small-business buyers.

Here are some key insights from the study:

1. 60 percent of prospective buyers are still transitioning from manual methods

When asked about their current methods for managing projects, roughly one-third of the prospective buyers in sample size, combined, said that they were 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 still managing projects using manual methods, such as email, spreadsheets and/or office management suites (e.g., Microsoft Office or Google Drive).

Compared with the 2014 data, 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, those buyers have been separated into more specific categories).

Celoxis POV

There are two alarming trends to be discussed here. One is the reliance on manual methods (more than 60%) and other is the use of multiple PM tools. Small companies are able to flex and adopt new working practices quickly. With higher accountability to projects, reliance on manual methods and/or multiple tools introduces inefficiencies in the system that prevent small businesses from scaling up. The 14% increase over the last year suggests that buyers are increasingly finding manual methods and multiple tools inefficient in managing their projects. It is important for organizations to firm up on a relevant project management methodology and then work towards choosing an all-in-one PM tool that addresses all their needs. It is also crucial to adopt a system that just doesn’t address short-term needs but also adapts to the scale.

2. First-Time Buyers Seek Organization and Automation

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

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

1. Improve organization (54 percent);
2. Automate processes, such as task management and time tracking (48 percent); and,
3. Increase transparency of project statuses and updates (45 percent).

Celoxis POV

The drive to organize and automate is healthy and shows intent. However, leaders need to steer clear of strategy myopia and look at building a future-proof project management environment. Basic tools and processes may be able to address key pain points such as productivity and automation in the short term, but may not be enough to sustain as they scale up. 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,” Kiron Bondale, a project and change management professional, PM blogger and frequent contributor at ProjectTimes.com (an online resource for PM professionals) explain.

Change management is another factor they need to look at when it comes to adoption. It may not be as challenging as in enterprises, but it is still tough nevertheless.

It is crucial to have a well laid short to mid to long-term strategy and map out a robust Project Management maturity model for the organization. This will help companies choose the right tools and methodologies that suit the evolving environment and get the best of their investments.

3. Outgrowing System Is Top Purchase Driver for Buyers Replacing Software

The majority of buyers looking to replace their current system say they are doing so because they’ve outgrown it (53 percent). The need 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.

Andrew Makar, an IT consultant and the author of industry blog Tactical Project Management explains, “Typically, “outgrowing” a system doesn’t refer solely to a business grows in size. 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. 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.

Celoxis POV

“Outgrowing” software, as taxing as it may be on the pockets is inevitable. You may opt to choose for an all-in-one tool right at the start of the PM maturity cycle but with it comes the risk of poor ROI as you end up paying for features and functionalities that are not relevant for your present business environment. The solution does not lie in adding multiple tools along the way. It lies in analyzing needs at every stage and making informed decisions with a vision.

4. More Buyers Request Advanced Functionality than Basic

In their last year’s findings, SA reported that 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).

In the initial chart, “Top-Requested PM Functionality” above, the “reporting and analytics” category groups the functionality that helps users visualize project status and performance together.

When we drill down further into this category it shows details of 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.

Celoxis POV

This trend while positive also could be a risk factor. Advanced features bring with them a steeper learning curve, training investments, and adoption challenges. This could end up being counter-productive. Organizations need to be thorough with the selection process. A detailed requirement analysis could help narrow down a set of tools that address the pain points. Making users a part of the evaluation process and anticipating adoption challenges will help organizations plan the implementation process better, leading to better control over ROI. So, in the end, it’s about what’s best for you and not what everyone says is the best (Read: How to Choose the Best Project Management Software in 2025).

Conclusion

If there is anything to learn from the market trends over the last decade, it is those small businesses today are the enterprises of tomorrow. As this Software Advice report indicates they are still a huge scope for small businesses to make better strategic decisions around project management. Here is a summary of our POV:

1. Mapping to a PM maturity model is crucial when it comes to making investments in tools and processes
2. Manual processes and multiple tools are counter-productive and defeat the very purpose of project management excellence.
3. Time spent in requirement analysis and evaluation is worth every minute. Setting up for success takes you that much closer to achieving it.

We would love to hear your take on this!