What is Project Portfolio Management about?

(Project) Portfolio management is a dynamic, decision-making process in which new projects and programs are evaluated, selected, prioritized in the context of the existing project and programs within the portfolio. The goal of portfolio management is to align with strategy, to maintain a balance in various project types within the portfolio, and to ensure that the portfolio fits with resource capability so that the organization sustains the maximum value project investment.

PPM has largely developed around the following elements: providing a centralized view of all the projects in an organization, enabling a financial and risk analysis of projects, modelling interdependencies between a  family of projects, incorporating constraints on resources shared between projects, enabling prioritization and selection of projects, ensuring accountability and governance at the portfolio level, allowing for portfolio optimization and providing support in the form of standardized processes and software tools.

Key elements in PPM

Key elements that constitute PPM:

• A centralised view of the project portfolio: Widely emphasized in the literature is the need for a centralized view of the organization’s projects. The first step in the adoption of PPM approaches requires the preparation of an inventory of current and proposed projects, preferably through a central area responsible for collecting, analyzing, and distributing project information in a common format.
• Financial Analysis: While finance professionals have worked for decades with metrics to capture return and risk of assets, the use of these methods for IT projects still seems uncommon for many organizations. Nonetheless, several techniques have been created to properly measure the financial value of projects. Most importantly, however, one should choose a valuation methodology, be it Return On Investment (ROI),  Internal Rate of Return (IRR), Net Present Value (NPV) or Economic Value Added (EVA), and consistently apply it.
• Risk analysis: two of the main reasons for project failure are “the failure to assess individual project risk and the failure to consider the aggregate risk of the portfolio of projects”. A portfolio should not be chosen considering only individual characteristics of the investments, but it should be built based on the overall risk and reward of the portfolio. When investment interactions are considered, one can create portfolios with the same expected return but lower risk than when not taking into account the interactions.
• Interdependencies: one advantage of PPM is its ability to reduce inter-program competition for resources and to turn program overlaps into productive interdependencies.
• Prioritisation, alignment and selection: The selection of projects to compose a portfolio should ensure that all areas of the organization’s strategy are properly addressed and that the portfolio is well balanced. When properly combining portfolio alignment and balance, organizations should come up with a very clear picture of which projects should be cut off and which ones should be funded.
• Constraints: incorporating constraints is a key step in the portfolio alignment process. Four types of constraints should b managed: scarce human resources, staff capabilities, budgets, and infrastructure.
• Dynamic re-assessment of the portfolio: only 26% of the respondents in their survey track financial measures after an investment is made. As a result, managers ignore options embedded in the portfolio, which would have allowed them either to abandon unprofitable projects before further investments are made or to expand successful investments.
• Need for specialized software: The need for specialized software for PPM is a controversial issue in the literature. Some believe that there is no need at all, whereas others claim that besides working as a process change catalyst, specialized software is indispensable due to the time-consuming process of updating all information needed for the decision making process. 

PPM core disciplines and processes

PPM allows for the collection of every company project to be organized into a single portfolio. Projects can easily be studied and monitored for progress and reviewed whether the project had quality execution. The end goal is to minimize the time and resources spent on each project to provide greater organizational success.

There are different ways of differentiating the aspects of PPM. One way is to look at the lifecycle of a project. This typically starts in early phases as an idea or demand (Demand Management), is added to a portfolio (Portfolio Management), and finally converted into a project and executed (Project Management). Two functions that are typically mentioned to accompany the whole process are definite financial planning (Financial Management) as well as a proper resource plan (Resource Management).

The features of PPM

• Demand Management
• Project Management
• Portfolio Management
• Resource Management
• Financial Management
• APM - Application Portfolio Management

Things to consider when deciding on a tool to support your PPM

There is no silver bullet—no single product solution that has all the functionality you require. The Project Portfolio Management tools have matured and similar functionality is now available across several tools.

Just as important to the PPM process as asking the right questions and using the right techniques is selecting an excellent PPM tool.

The right PPM tool not only gives you insight into every detail of your portfolio as a whole, it supports and strengthens the people and processes involved. It does so by aligning project selection with your organization’s budgeting processes, ensuring that projects match priorities and (organizational) goals, that they support fiscal budgets, and that they’re achievable with the available workforce.

Some of the must-have attributes and functions for PPM software include:

• Strategic planning
• Capital planning
• Demand management
• Project planning
• Project execution
• Resource management
• Portfolio analysis and reporting
• Stage gates and automated workflows

The data that comes from these functions gives you real-time, objective insights into what’s happening across projects. It allows you to make informed decisions by evaluating “what-if” scenarios like:

• What would happen if a particular project is cancelled?
• How would next year’s roadmap be impacted if the budget was increased by 10% this year?
• What happens, if we have to realign due to a strategy change?

Select a toolset that that fully integrates with your supporting systems. Make sure the portfolio can be sustained with a minimum amount of manual effort yet does not depend on the uniform, enterprise-wide adoption of detailed planning tools.

With Capture SmartStart you can jump-start your PPM processes with our experts, pre-configured processes from best practice, proven implementation methodology and sustainable support services - no matter where you are on your PPM journey. You benefit from no financial risk – no product risk – no methodical risk.

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