You might not know what project portfolio management (PPM) is or what it enables you to do. Maybe you've never even heard of it. But chances are your organization needs it in a big way. In fact, any enterprise that's looking to achieve its goals via business and technology initiatives needs to grasp this concept – or risk seeing projects flame out at great cost to the organization.
PPM is the centralized management of processes, methods, and technologies used by teams to oversee and evaluate current or proposed projects based on several criteria. The aim of PPM is to find the best possible combination of resources to help an organization achieve its goals, taking into account factors such as external market conditions, customer demands, and regulatory restraints.
The management of project portfolios “ensures that an organization can leverage its project selection and execution success,” according to the Project Management Institute, an organization that supports more than 2.9 million project management professionals worldwide through collaboration, education and research. The institute says its research has shown that PPM “is a way to bridge the gap between strategy and implementation.”
How PPM Differs from Project Management
Why Organizations Need Project Portfolio Management
The need for PPM arises from the fact that projects require time, money, and staff to complete. These resources are often limited – and not all projects are equally valuable to an organization – so there needs to be a way to manage the resources to ensure that projects will move successfully to completion.
PPM helps keep projects aligned with organizational goals and strategy, supports the assignment and prioritization of resources, and manages the resources that have been deployed across various projects.
A Growing Market That’s Meeting a Need
A growing number of organizations, perhaps realizing the value of PPM or expecting to see benefits, are investing in software products that support portfolio management. A 2017 report on the market by Grand View Research Inc. estimated that the global market would reach $8.85 billion by 2025.
One of the factors contributing to the growth of PPM software is the rise in mobile devices in the workplace, according to the report. The growing trend of allowing employees to use mobile devices at work is expected to improve employee productivity and real-time project monitoring. That, in turn, makes it feasible to implement PPM solutions.
Also driving growth are emerging use cases industries in which managers are looking for solutions to support effective decision-making and prevent project complexities. For example, Grand View Research Inc. said the extensive use of PPM with data analytics to offer convenient services to customers at low costs in the banking and financial services industry and IT and telecommunications sectors is expected to drive market growth (in its "Project Portfolio Management Market Size Worth $8.85 Billion By 2025" article).
Increasing complexity in banking operations, a result of increased multi-regional operations and outsourcing activities, is expected to boost demand for PPM products in banking and financial services. Use of PPM in that sector is projected to grow at a compound annual growth rate (CAGR) of 12% over the forecast period.
In addition, emerging businesses that adopt cloud-based services are expected to fuel the growth of the market over the forecast period.
Clearly there's a need for technology that helps companies improve the way they manage project portfolios.
A February 2018 global survey by the Project Management Institute showed that about $1 million is wasted every 20 seconds collectively by organizations around the world due to the ineffective implementation of business strategy through poor project management practices.
This equates to about $2 trillion dollars wasted each year, the institute said.
The study showed that on average organizations waste 10% of every dollar due to poor project performance, and that about one in three projects (31%) do not meet their goals, 43% are not completed within budget, and nearly half (48%) are not completed on time. It's especially alarming that executive leaders might be out of touch with this reality, the report said, with 85% of those surveyed saying they think their organizations are effective in delivering projects to achieve strategic results.
“These factors are leading to colossal financial losses for businesses around the world, with a significant broader macro-economic impact,” the report said.
The 2017 Project and Portfolio Management Landscape report by Planview, which is based on an online survey of 221 project management and IT professionals conducted between February and March 2017, showed that 73% of organizations don't have enough resources to meet incoming demand.
More than half of the respondents (55%) report that their projects and resources are not well aligned with business goals, and 49% had seen a project fail in the previous 12 months.
PPM Use Cases and Benefits
Any company trying to manage multiple technology and business projects can leverage project portfolio management to increase the likelihood of having successful projects completed on time and within budget.
The popularity of PPM has coincided with the rise of the project management office (PMO) at many organizations, formed to oversee the progress of multiple endeavors. At larger enterprises, there might be any number of projects underway at the same time, with varying degrees of complexity. Types of projects might include marketing campaigns, hiring efforts, customer acquisitions, or the development of new banking services or new products such as automobile models, pharmaceuticals, or business applications.
With the emergence of agile development, scaled agile, lean agile, collaborative work, and other newer ways of getting work done, the very definition of a project has expanded. One thing all these methods have in common is that they're designed to help work efforts move faster.
At many organizations there is a continuous demand for projects and a lack of resources to fulfill these endeavors, and that's where PPM comes into play. It can act as the engine to determine which projects make sense to launch and which should be put on hold or scrapped.
Because PPM software provides a way to track and manage projects in a centralized way and keep managers abreast of how work is progressing and resources are being deployed, PPM is ideal for any organization dealing with complex workloads. It provides a visibility into project updates and resources that would not otherwise be possible.
This visibility also helps companies avoid the problem of having redundant projects. By consolidating projects into a single software database, PMOs and executives can see whether any projects overlap, or are of low value compared with others.
Project portfolio management can deliver a host of other benefits to organizations. One is a reduction in project risk. If a company is closely tracking the progress of a project and allocating the needed resources, there's a much greater likelihood the project will be completed successfully. The risk of wasting time, money, and effort is reduced or eliminated. PPM enables companies to minimize the risk of project delays, lack of cohesiveness, lack of access to needed tools, and mismanagement of resources.
PPM software also helps companies stay on budget with projects. Anyone who's worked in corporate planning environments knows how easily projects can quickly become runaways and end up costing much more than originally anticipated. PPM helps ensure that projects always have the right resources and number of resources to fulfill projects in a timely manner and at roughly the expected cost.
Another key benefit is collaboration. PPM enables teams to work more transparently and in a collaborative manner. Team members can effectively share ideas, and collaborative decision making is easier. When projects are consolidated into a single database, all members of project teams have visibility into each other's work and progress.
Ultimately, projects that are properly managed can also mean more satisfied team members, customers, and business partners. If projects are completely successfully, it reflects well on all who worked on the projects. If products and services get to market more quickly and are of higher quality, the customers who purchase them are happy.
The PPM Ecosystem – and How to Avoid Failure
PPM and project management efforts in general do not operate in a vacuum. They are by nature intricately tied to other facets of the business and in many cases to other applications.
For example, PPM software is often integrated with enterprise resource planning (ERP), enterprise architecture, or other corporate applications such as financial systems. The project planning office often coordinates with the legal, finance, and human resources departments, and their respective systems and applications naturally will be linked in some ways.
Integration among these platforms works well because these are complementary technologies; the integration does not affect the performance of PPM or other systems. Integrating PPM with other processes can create an ecosystem that enables companies to gain more value from their projects.
At the same time, it's important to understand that PPM can fail, and companies need to take steps to avoid failure or achieving less-than-optimal performance from these solutions. One common problem is expecting too much too soon from PPM. Successful project portfolio management is a journey, and there's a maturity curve related to PPM.
Research firm Gartner has said there are five stages of PPM maturity, and it can take two years to move from one stage of maturity to the next. Not all companies need to reach level five. But an organization that moves too fast might see high staff turnover due to rapidly increasing work demand.
Another potential cause of failure is a lack of support from people within the organization, from the most senior executives to the staffers doing the project work. The deployment and use of PPM needs to be supported by the CEO, COO and other senior executives; it's common sense that technology initiatives are likely to be more successful if they have the backing of the people running the business.
Lack of communication is another potential pitfall. Even with the latest and most advanced technologies in place, if the people involved are not effectively communicating and collaborating with each other, failures will occur, and PPM will not deliver on its promise. Communication needs to take place at all levels and among all PPM stakeholders.
By taking the right steps companies can thrive with PPM. And given the growing pressure on organizations to complete projects quickly and on budget, there's no better time to be leveraging the technology.