Project Portfolio Management (PPM): Aligning business and IT
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.
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.
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.
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.
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.
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.
"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.
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.