Project Portfolio Management – An Overview

Project Portfolio Management

Types of ITS Portfolio Management: Project Portfolio Management, Application Portfolio Management and Infrastructure Portfolio Management

Many IT organizations lack adequate governance resulting in sub-optimal realization of business benefits. These organizations lack a framework to prioritize IT investments resulting in diminished confidence in the eyes of senior executives including Chief Executive Officer or the Chief Financial Officer. However, by managing IT investments as a portfolio of financial investments, risk and returns could be optimized, and assets could be allocated.

IT Portfolio management is more applicable to larger IT organizations since in smaller organizations, its concerns might be generalized into IT planning and IT governance as a whole.

In this article we will take a close look at IT Portfolio Management. But before we delve deep into IT portfolio management, we will also have a quick look at the basics of project, program and portfolio management and how they are all related to each other.

Project & Project Management

A project is a temporary endeavor to create a unique product, service or result.

A Project can involve a single person, a single organizational unit or multiple organizational units. It has a definite beginning and end but its benefits may continue to provide an ongoing service.

The development and implementation of web based purchase management software could be considered as a project. The project may involve a team of developers and a project manager, and will have a definite beginning and end. The project will end with the implementation of the software and the benefits of using the purchase management software may also continue to provide an ongoing service to the purchase departments of an organization where the software is implemented.

Project management involves the development and implementation of plans to achieve a specific scope that is driven by the objectives of the program or portfolio that projects are subjected to, and ultimately to organizational strategies.

Program & Program Management

a program is a group of related projects managed in a coordinated way to obtain benefits and control not available from managing the projects individually.

Programs are composed of various components, a majority of which are the individual projects within the program. Programs may include work related to the component projects such as training and maintenance activities. They also include work not related to a specific project alone, but regarding the entire program such as program governance and stakeholder management.

The implementation of the Enterprise Resource Planning system in an organization could be considered as a Program. The ERP system may include several specific individual projects
(Finance, Stores, Purchase, Marketing etc) Each of these specific projects could be run by a project manager using a formal project management approach. The overall grouping of these related projects are run by a program manager.

Program management involves the harmonization of the projects and program components and control inter-dependencies in order to realize specific benefits.

Portfolio & Portfolio Management

a portfolio is a collection of projects or programs and other work that are grouped together. This is done to facilitate effective management of that work that will meet strategic business objectives. These projects or programs are not necessarily interdependent or directly related. This typically includes identifying, prioritizing and authorizing projects and programs to meet strategic business objectives.

Portfolio management is conventionally associated with financial strategies. Instead of
putting all their money in one place, organizations spread their money around and create a diverse portfolio of different types of investments such as stocks, bonds, small - cap, large - cap, domestic and international. They then manage the risk and returns in their portfolios by adjusting the mix and amount of investments, since it is unlikely that all these portfolios will go through a rise and fall simultaneously.

For instance, organizations such as Google, Intuit, 3M, P&G and Apple, who continually innovate, don't put all their money in one place. Instead they create diverse portfolios of innovation projects of different types, technologies and, markets. These companies then actively manage these portfolios by allocating resources differentially i.e. periodically killing some projects while doubling down on others.

Conversely there are many organizations who struggle with innovation since they do not manage their portfolio of projects well enough, allowing poorly performing projects to continue while starving those which have more potential.

Portfolio management involves the alignment with organizational strategies by the selection of the right programs or projects, prioritization of the work and allocation of the needed resources to programs and projects.

Portfolio Management Processes

a portfolio manager is able to manage his portfolios by using various portfolio management processes .Having a formal portfolio management process helps executives determine which projects most closely align with the organization's strategic goals, allows the organization to stage projects to avoid resource bottlenecks, and improves the vetting of proposed project requests that can be formally approved. A process within the context of portfolio management is a set of interrelated activities .These activities are performed by the portfolio manager to achieve a strategic element such as a goal, objective or action which will provide strategic planning benefits to the organization. Each process is characterized by its inputs, tools, and techniques that may be applied and the resulting outputs. Each portfolio manager is responsible for determining the processes which are appropriate for a given portfolio and their impact on the expected organizational results which are delivered by portfolio.

Roles of Project, Program and Portfolio managers

the roles of a Project manager, Program manager and a Portfolio manager may have some similarities but they are fundamentally different. Organizations who successfully deliver projects and programs that produce strategic business results are those who formalize these three distinct roles. They use the methodologies, processes, tools, and resources which are most appropriate for the function being performed.

Conversely, there are organizations that blend these roles together and treat them all as basic project management. This may help these organizations in reducing some overhead and bureaucracy, but eventually, this could result in failures. An excellent project manager may not necessarily be a good program manager or be capable of running the overall portfolio.

Therefore, let us now try and understand the roles of a project manager, a program manager and a portfolio manager; and understand how they are fundamentally different from each other.

Role of a Project manager

Project managers are responsible for implementing their projects within the desired schedule and budget and achieving the overall project objectives. They launch projects, establish and drive the project plan, monitor and assess risks and report the status of the project costs, quality and schedule, besides performing other activities which are related to managing their projects.

Role of a Program Manager

Program managers have a broader view of the program than project managers do. They have to ensure that the overall business objectives are met by the benefits each project is supposed to realize.

Project managers are responsible for delivering those project benefits.

The program manager is responsible for rolling up of information from each individual project and ensuring that the overall program is driven towards the project objectives.

Therefore projects managers are expected to manage their projects in a manner in which they integrate well in the overall program plan.

The program manager is also responsible for tracking and analyzing the entire program.  This also involves managing the collective risk for the entire program and not just for a single individual project.

Role of a Portfolio Manager

A portfolio manager is responsible for identifying and prioritizing projects and programs as well as authorizing new ones. He performs these activities within the context of achieving the strategic business objectives. He allocates the needed resources to the project managers and program managers for the successful delivery of the projects and programs. He develops the frameworks and methodologies for managing the portfolios and ensures that infrastructure and systems to manage the portfolios are in place. He reviews all the reports that program managers submit to leverage economies of scale, reduce risks, and ensure that benefits being realized through each component are aligned to the organizational strategic goals and meet their key performance indicators like return on investment. He is also responsible for engaging the stakeholders to ensure that they all understand how the portfolios perform and the risks that they face.

How do project, program and portfolio managers work together?

Portfolio managers, program managers and project managers depend upon one another in order to do their jobs successfully.

Project managers depend upon program managers and portfolio managers for the resources needed to deliver successful projects.

Program managers depend upon project managers for program deliverables and on portfolio managers for resources.

Portfolio managers provide resources to both project and program managers to facilitate their delivery on strategies. In turn portfolio managers depend upon program managers and on project managers to provide accurate progress reports and to deliver on strategic initiatives.

IT portfolio Management

There are many other areas where portfolio management can be applied including IT investments.

At its most mature level, IT Portfolio management is accomplished by the following types of portfolio management.

Project Portfolio Management (PPM)

In this type of portfolio management , an organization analyzes and collectively manages a group of current or proposed projects based on certain criteria such as strategic value, impact on resources, cost etc. While doing so, the PMO's of organizations makes use of a centralized management of processes, methods and technologies. The objective of PPM is to allow the portfolio owner to determine the optimal resource mix for delivery and to schedule activities in a manner in which an organization's operational and financial goals could be achieved.

PPM provides a lot of benefits to its users including effective management of time , resources , skills and budgets ; proper identification of the most suitable approach to deliver projects and programs , and a framework for issue resolution and risk mitigation etc.

Application portfolio Management

In this type of portfolio management, an organization compares its spending’s, based on their relative value. The comparison is based on a lot of tangible and non-tangible factors including profitability of the IT investments, the users' familiarity with applications and infrastructure, obsolescence of old technologies and emergence of new ones, and an organizations experience with a certain technology.

Infrastructure Portfolio Management

Infrastructure Management involves the management of essential operation components such as equipment, data, human resources, processes, policies etc. Many organizations neglect infrastructure management, resulting in cost overruns, overpayments, and failures.

Conclusion
The roles of a Project manager, Program manager and a Portfolio manager may have some similarities but they are fundamentally different. Organizations who successfully deliver projects and programs that produce strategic business results are those who formalize these three distinct roles and use the methodologies, processes, tools, and resources which are most appropriate for the function being performed.

The concept of portfolio management could be applied to IT investments as well. By managing IT investments as a portfolio of financial investments, risk and returns could be optimized, and assets could be allocated. At its most mature level, IT portfolio management could be accomplished through Project Portfolio Management, Application Portfolio Management and Infrastructure Portfolio Management.


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About the Author

EshnaEshna

Eshna is a writer at Simplilearn. She has done Masters in Journalism and Mass Communication and is a Gold Medalist in the same. A voracious reader, she has penned several articles in leading national newspapers like TOI, HT and The Telegraph. She loves traveling and photography.

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