Project Portfolio Management

(PPM): Aligning business and IT

Ashok Reddy
Published on May 14, 2004

Today's business organizations are increasingly using software

development and IT to capture and apply knowledge that is unique to
their business in order to drive innovation and make better use of
limited resources. This reliance on IT to support new business
initiatives is a major aspect of on-demand computing, IBM's vision
for a business environment in which companies respond with
flexibility and speed to any customer demand, market opportunity, or
external threat. Realizing this capability, however, has its
challenges, including:

 Lack of understanding among business managers about how IT can help achieve
corporate goals; many regard IT as a necessary evil.
 In some organizations that recognize the importance of investing in IT to achieve
corporate goals, IT projects often do not deliver enough value because they fail to align
themselves with business objectives.
 Some IT organizations launch more projects than they can handle effectively; and they
neglect to set project priorities based on business objectives.
 IT decision makers in many organizations do not know how to analyze needs and focus
resources on projects that would lead to better efficiency and cost savings.

This article introduces Project Portfolio Management, or PPM, a

strategy supported by IBM's Software Development Platform that helps
organizations meet these challenges. This article will explain the
strategy; a future article will discuss how IBM Software Development
Platform tools, including IBM Rational Unified Process,® or RUP,®
function in connection with PPM.

What is PPM?

PPM is a strategy that allows organizations to align their IT and

application development projects, resources, and initiatives to
corporate business objectives by developing and monitoring measures
that treat IT assets as financial assets -- and to run as a project-
oriented business. PPM enables integrated management of pipeline,
scope, time, resource, skills, cost, procurement, communication,
reporting and forecasting, and risk management functions.

In essence, PPM allows you to manage a portfolio of projects much as

you would manage a portfolio of diverse investments, such as stocks,
bonds, real estate, and so forth. By maintaining a balanced
portfolio, you can reduce the risks of individual projects and
produce an overall higher rate of return. PPM allows executives and
managers to proactively monitor their project portfolios for
alignment with business objectives and planned costs and schedules.
It also allows them to identify project risks and quickly address
them.

Business drivers for PPM

Why do businesses need a PPM strategy? Let's look at some of the

strongest reasons:

 Limited IT budgets and resources. Most organizations need to improve the way they use
their existing resources in order to maximize productivity. This applies to both people
and tools.
 Need for better IT governance (and data for compliance with Sarbanes Oxley Act (1) ).
Many IT organizations lack a consistent, accountable body for decision making. PPM
provides a decision-making framework that helps ensure IT decisions are aligned with
the overall business strategy; IT participates in setting business goals and directions,
establishing standards, and prioritizing investments.
 Need to improve project success rate. According to the latest Standish Group survey,
executive support and clear business objectives are among the top ten success factors for
application development projects. PPM includes approaches for achieving both of these
requirements.

Table 1 lists, by IT management role, the specific challenges that

PPM addresses.

Role Challenges
 Cope with reduced budgets and increased expectations.
 Meet productivity goals consistently.
 Align business goals and IT projects.
CFO/CIO/CTO  Use reliable measures to determine whether teams are really working
on the "right" projects.
 Put out fires and cut costs that prevent proactive planning.

Portfolio/  Prioritize initiatives, resources, and assets across the project portfolio.
 Role Challenges
Program  Assess and communicate portfolio status.
Manager  Ensure consistent processes across projects.
 Enable reuse of assets and optimize key resources across projects.

 Align project management and application development processes.

 Match up business team and technical team perspectives.
 Predict project outcomes, assess project status, and identify inter-
Project Manager
project dependencies.
 Manage scope, planning, verification, and change management.

 Understand project scope: priorities, requirements, dependencies,

and traceability.
Team Members
 Monitor and report progress without sacrificing coding activities.

Key benefits of PPM

As with any new strategy, introducing PPM into an organization

requires an investment of time and effort. However, this investment
yields proven benefits:

 Closer alignment of IT with business: With an easily digestible, holistic view of their
entire project portfolio, executives and managers can more readily understand where IT
dollars are being spent and which projects continue to be worthwhile.
 Better IT governance: PPM helps managers monitor project progress in real time and
provides detailed data to help satisfy Sarbanes Oxley Act compliance specifications.
 Cost reductions and productivity increases: PPM helps managers identify redundancies
and allocate resources appropriately; it enables them to make better IT staffing and
outsourcing decisions, and to spot opportunities for asset reuse.
 Business-based decision making: By viewing projects as they would view components of
an investment portfolio, managers can make decisions based not only on projected
costs, but also on anticipated risks and returns in relation to other projects/initiatives.
This leads to improvements in customer service and greater client loyalty.
 More predictable project outcomes: A PPM strategy bridges the gap between business
managers and the practitioners who deliver the projects; it ensures consistent processes
across projects and helps managers assess project status in real-time, predict project
outcomes, and identify inter-project dependencies.
Aspects of IT management

As Table 2 shows, the PPM strategy addresses four main aspects of IT

management associated with specific activities and functions. The
table also details automated support for these activities and
functions.

Aspect Activities Function

 Identify and prioritize projects
 Formulate vision/strategy  Method management
 Analyze ROI  Idea/innovation management
Govern
 Verify project value  Portfolio management
 Communicate progress and results

 Program planning
 Schedule
 Project planning
 Allocate resources for optimization
 Resource planning
Plan and process efficiency
 Scheduling
 Create a balanced portfolio
 Financial planning

 Translate goals into action  Business process modeling

 Measure and verify performance  Requirements analysis
Build
 Deliver results  Design and construction

 Manage and maintain products  Maintenance and

 Measure project results against productivity monitoring
Operate
business objectives  Business monitoring

Govern

Governance relates to the most important questions for software

development and IT managers: "Are we working on the right things, and
are we building the right system?" If their teams don't get this
right, nothing else matters. A project might be successful from a
schedule, budget, or scope perspective, but if it fails to meet
business objectives, it fails overall. Efforts to align business and
IT objectives are often thwarted by governance issues, such as:

 Project teams use different vocabularies.

 Team members do not understand the business objectives.
 Projects are not prioritized by ROI potential.
  Software requirements are not traceable to business objectives.

To address these common causes of failure, a PPM strategy provides

support for governance, including:

 Method management: A consistent, repeatable process, providing the means for

establishing a common vocabulary, instituting a framework for assessing project health,
and prioritizing initiatives.
 Idea/innovation management: Support for considering IT project requests in relation to
other prospective and current projects (project pipeline management).
 Portfolio management: Ways to align and prioritize proposed initiatives and projects.

Plan

Functionality that enables planning under a PPM strategy includes:

 Program management: A holistic view of multiple projects and their inter-dependencies.

 Project management: Support for planning and tracking schedules, establishing
milestones and assigning tasks for individual projects, identifying project dependencies,
completing Gantt charts and other reporting artifacts.
 Resource management: Ways to plan, balance, and schedule resources for IT initiatives.
 Time management: Means to allocate, track, and compare time spent on project
activities.
 Financial management: Help with establishing and managing IT budgets; means for
capturing expenses and obtaining approvals.

Build

To ensure that developers build systems correctly, a PPM strategy

includes functionality for:

 Business process modeling: Support for managers to discover, document, and specify
current business processes with metrics, and specify new goals and requirements.
 Requirements analysis: Means to analyze financials and prioritize projects according to
potential business value, define and prioritize requirements, identify/prepare existing
assets for reuse.
 Design and construction: Functionality for rapid integration and/or application
development, visual construction and programmatic code generation, unit testing and
debugging.
 Testing and deployment: Support for functional and load testing, and for managing
testing requirements.
 Change management: Configuration management and change management support to
deploy and monitor the solution.
Operate

To verify a system's effectiveness, a PPM approach includes

functionality for:

 Maintenance and productivity monitoring: Support for testing and measuring system
performance.
 Business metrics collection: Means for collecting and analyzing post-deployment
business results. PPM also helps you track metrics for component reuse.
 Setup and monitoring of Service Level Agreements (SLA): Setup for specific IT service
levels and metrics collection for response time, service availability, and other
parameters.

First steps: A common process

Instituting a PPM strategy is one way IT managers can begin

diagnosing and addressing the causes of project failures. However,
ultimately, the "cure" must come from those managers' determination
to bridge the disconnect between products their teams produce and the
decisions of their organizations' business strategists. Standardizing
on an automated process across every project in the IT portfolio is a
proven way for managers to start building the bridge. RUP enables
many of the management functions we have described in this article. A
key component of IBM Software Development Platform support for the
PPM strategy, RUP helps managers make meaningful plans, assessments,
and corrections. It also provides a common, enterprise-wide
vocabulary to enable communication among IT and business groups.

In an article to be published in The Rational Edge in Fall 2004, I

will detail the support that RUP and other automated tools in IBM
Software Development Platform provide for PPM. In the meantime, to
get more information on the PPM strategy, see References below.

References

"How to Run IT Like a Business." CIO Magazine, May 1, 2004.

"At Your Service," eweek, March 1, 2004.

"The Best Best Practices: CIO Research Reveals the Basic Building
Blocks of IT as a Business." CIO Magazine, May 1, 2004.
Notes
1
This Act is designed "to protect investors by improving the
accuracy and reliability of corporate disclosures made pursuant to
the securities laws." Organized into eleven titles, the Act has three
sections especially relevant to IT: Section 404, which requires
officers to attest to the effectiveness of internal controls for
financial reporting; Section 302, which requires officers to sign
statements verifying the completeness and accuracy of financial
statements; and Section 409, which requires that "material financial
events" be reported in real time. The internal control report must
articulate management's responsibilities to establish and maintain
adequate internal control over financial reporting as well as
management's conclusion on the effectiveness of these internal
controls at year-end. The report must also state that the company's
independent public accountant has attested to and reported on
management's evaluation of internal control over financial reporting.
More information is available at the http://www.sarbanes-oxley-
forum.com.