What is Project Portfolio Management?

Project Portfolio Management (PPM) is a term used to describe the different approaches towards treating the various processes in project management as a part of a project investment portfolio.

Thus, it is a complete shift from the one-off, ad-hoc approach towards project management and a set of projects is treated as a portfolio. These concepts are borrowed from established portfolio optimization methods such as the Options Theory, Modern Portfolio Theory and Applied Information Economics from the financial information sector.

The project portfolio management concepts are thus held to be quite similar to the IT project management and portfolio management concepts. They are also considered to be a part of corporate portfolio management concepts and thus can be used by any corporate segment or group effectively.

What are the functions of the various PPM tools?

Various PPM tools are used to measure the performance of all the different projects within the organization. Apart from performance analysis, these PPM tools can also help the organization objectively decide things such as whether the project is contributing to the overall achievement of the portfolio or not, whether the projects performance will negatively impact other projects, which projects in the portfolio are inter-dependant, and most importantly, whether the project will deliver the desired objective or benefit. All these factors are measured in terms of a cost-benefit analysis.

One of the PPM tools which is quite popular is the use of decision trees in formulating business decisions regarding project management. This is very popular, especially within the higher echelons of management. The decision nodes in the decision tree use multiple options that optimize against a constraint. Ideally, the combination of the projects in the project portfolio should yield a certain amount of payoff. If the cost-benefit analysis is not in accordance with desired results, an opportunity cost analysis is conducted and that particular project can be discontinued and these resources can be allocated elsewhere.

Thus, resource allocation becomes a very important function of these PPM tools. This includes all kinds of resources and capital including human and financial. Different stages of planning, budgeting and implementation are included within this function. Start and finish dates for projects are also established. Future projects can also be forecasted.

Apart from the various cost and benefits analyses, another function of PPM tools is called Pipeline Management. This encompasses an analysis which considers that within the given the number of projects happening simultaneously in an organization, and given the limited or finite amount of resources within the organization, how the different projects in the portfolio will be executed in the specified time. Thus, it can be seen that resource allocation is the first step towards a pipeline management analysis. This ensures a realistic approach of the organization towards the planning processes.

What are the ideal features of Project Portfolio Management (PPM) Tools?

Based on the points mentioned above, we can thus compile a list of the various features which a PPM tool should ideally provide. They are: A streamlined method of project evaluation: The project evaluation method needs to be streamlined, systemized and thus organized in an orderly fashion in order to ensure that project evaluation becomes a smooth and comprehensive process. Resource planning: As seen before, resources of an organization are always finite. It doesnt make sense for any organization to plan a project portfolio which goes beyond the limits of the resources which they have. Tracking of costs and benefits: This ensures that the budgeted and the actual costs and benefits are recorded and compared so as to ensure that the logic used for the project portfolio management can be checked, and corrected if required. This data can also be used in the future within the organization for creating comprehensive PPM policies. Cost-benefits analysis: This is again a key element in any project management venture. However within the purview of project portfolio management methods, this analysis can be conducted across all projects held within the organization. Opportunity cost analysis: This is again an important aspect of project portfolio management. This can help organizations analyze the effectiveness of each and every project when compared to its efficiency and value addition to the entire project portfolio. Reports on the progress of the various projects at different levels of execution: Again, this is an important PPM tool. All this data and information should be easily translated and collated into various types of reports which can be circulated to all levels of management within the organization. Communication enablement: These PPM tools should also include a communications module which will ensure that the relevant data gets communicated to the different operational heads, so that they can bear the organizational goals in mind while executing their projects.

Accessibility: This is one of the basic and important functions which must be included, especially in todays world. These PPM tools must be both accessible for the relevant people within the organization and the accessibility must cover all IT related aspects as well (such as web accessibility, cross platform accessibility and integration etc.). Based on these features one can decide if the organization needs to implement such a strategy within their policies and even purchase the various PPM tools that are available in the market today.