Recent Issues on The ysd

Chapter 5

RECENT ISSUES ON THE

POTRFOLIO MANAGEMENT

5.1 IT Portfolio Management

5.1.1 Introduction

IT portfolio management is the application of systematic management to large

classes of items managed by enterprise Information Technology (IT) capabilities.

Examples of IT portfolios would be planned initiatives, projects, and ongoing IT

services (such as application support). The promise of IT portfolio management is

the quantification of previously informal IT efforts, enabling measurement and

objective evaluation of investment scenarios.

Debates exist on the best way to measure value of IT investment. As pointed out

by Jeffery and Leliveld, companies have spent billions of dollars on IT

investments and yet the headlines of miss-spent money are not

uncommon. Nicholas Carr has caused significant controversy in IT industry and

academia by positioning IT as an expense similar to utilities such as electricity.

IT portfolio management started with a project-centric bias, but is evolving to

include steady-state portfolio entries such as infrastructure and application

maintenance. IT budgets tend not to track these efforts at a sufficient level of

granularity for effective financial tracking.

The concept is analogous to financial portfolio management, but there are

significant differences. Financial portfolio assets typically have consistent

measurement information (enabling accurate and objective comparisons), and

this is at the base of the concept’s usefulness in application to IT. However,

achieving such universality of measurement is going to take considerable effort in

the IT industry (see, for example, Val IT). IT investments are not liquid, like stocks

http://en.wikipedia.org/wiki/Val_IT

http://en.wikipedia.org/wiki/Investment_management

http://en.wikipedia.org/wiki/Nicholas_Carr

http://en.wikipedia.org/wiki/Information_Technology

Chapter 5 Recent Issues on the Portfolio Management

and bonds (although investment portfolios may also include illiquid assets), and

are measured using both financial and non-financial yardsticks (for example,

a balanced scorecard approach); a purely financial view is not sufficient. Finally,

assets in an IT portfolio have a functional relationship to the organization, such as

an inventory management system for logistics or a human resources system for

tracking employees' time. This is analogous to a vertically integrated company

which may own an oil field, a refinery, and retail gas stations.

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http://en.wikipedia.org/wiki/Vertical_integration

http://en.wikipedia.org/wiki/Balanced_scorecard


IT portfolio management is distinct from IT financial management in that it has an

explicitly directive, strategic goal in determining what to continue investing in

versus what to divest from.

At its most mature, IT portfolio management is accomplished through the creation

of three portfolios:

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Application Portfolio - Management of this portfolio focuses on

comparing spending on established systems based upon their relative

value to the organization. The comparison can be based upon the level of

contribution in terms of IT investment’s profitability. Additionally, this

comparison can also be based upon the non-tangible factors such as

organizations’ level of experience with a certain technology, users’

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http://en.wikipedia.org/wiki/Application_Portfolio_Management


familiarity with the applications and infrastructure, and external forces such

as emergence of new technologies and obsolescence of old ones.

Infrastructure Portfolio – This For an organization's information

technology, infrastructure management (IM) is the management of

essential operation components, such as policies, processes, equipment,

data, human resources, and external contacts, for overall effectiveness.

Infrastructure management is sometimes divided into categories of

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http://en.wikipedia.org/w/index.php?title=Infrastructure_Portfolio_Management&action=edit&redlink=1


systems management, network management, and storage management.

The ability of organizations to exploit IT infrastructure, operations and

management sourcing/service solutions not only depends on the

availability, cost and effectiveness of applications and services, but also

with coming to terms with solution providers, and managing the entire

sourcing process. In the rush to reduce costs, increase IT quality and

increase competitiveness by way of selective IT sourcing and services,

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many organizations do not consider the management side of the equation.

The predictable result of this neglect is overpayment, cost overruns, unmet

expectations and outright failure.

Project Portfolio - This type of portfolio management specially addresses

the issues with spending on the development of innovative capabilities in

terms of potential ROI, reducing investment overlaps in situations where

reorganization or acquisition occurs, or complying with legal or regulatory

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http://en.wikipedia.org/wiki/Project_Portfolio_Management


mandates. The management issues with project-oriented portfolio

management can be judged by criteria such as ROI, strategic alignment,

data cleanliness, maintenance savings, suitability of resulting solution and

the relative value of new investments to replace these projects.

Information Technology portfolio management as a systematic discipline is more

applicable to larger IT organizations; in smaller organizations its concerns might

be generalized into IT planning and governance as a whole.

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5.1.2 Benefits of Using IT Portfolio Management

Jeffery and Leliveld have listed several benefits of applying IT portfolio

management approach for IT investments. They argue that agility of portfolio

management is its biggest advantage over investment approaches and methods.

Other benefits include central oversight of budget, risk management, strategic

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http://en.wikipedia.org/wiki/IT_portfolio_management#Benefits_of_using_IT_portfolio_management


alignment of IT investments, demand and investment management along with

standardization of investment procedure, rules and plans.

5.1.3 Implementing IT Portfolio Management

Jeffery and Leliveld have pointed out a number of hurdles and success factors

that CIOs might face while attempting to implement IT portfolio management

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http://en.wikipedia.org/wiki/IT_portfolio_management#Implementing_IT_portfolio_management


approach. To overcome these hurdles, simple methods such as proposed by

Pisello can be used.

Other implementation methods include

Risk Profile Analysis (figure out what needs to be measured and what

risks are associated with it),

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Decide On The Diversification Of Projects, infrastructure and

technologies (it is an important tool that IT portfolio management provides

to judge the level of investments on the basis of how investments should

be made in various elements of the portfolio),

Continuous Alignment With Business Goals (highest levels of

organizations should have a buy-in in the portfolio) and

Continuous Improvement (lessons learned and investment adjustments).

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Maizlish and Handler provide a proven step-by-step methodology for applying IT

portfolio management that has eight stages. In today's fast-paced world, waterfall

approaches to delivering anything are proving to be less and less effective.

Nonetheless, the eight stages are:

1. Developing an IT portfolio management game plan

2. Planning the IT portfolio

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3. Creating the IT portfolio

4. Assessing the IT portfolio

5. Balancing the IT portfolio

6. Communicating the IT portfolio

7. Developing and evolving IT portfolio governance and organization

8. Assessing IT portfolio management process execution

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There is no single best way to implement IT portfolio approach and therefore

variety of approaches can applied. Obviously the methods are not set in stone

and will need altering depending upon the individual circumstances of different

organizations.

5.1.4 IT Portfolio Management vs. Balanced Scorecard

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http://en.wikipedia.org/wiki/IT_portfolio_management#IT_portfolio_management_vs._balanced_scorecard


The biggest advantage of IT portfolio management is the agility of the investment

adjustments. While balanced scorecards also emphasize the use of vision and

strategy in any investment decision, oversight and control of operation budgets is

not the goal. IT portfolio management allows organizations to adjust the

investments based upon the feedback mechanism built into the IT portfolio

management.

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http://en.wikipedia.org/wiki/Balanced_scorecard


5.1.5 Freeware and Open Source Tools

MappIT is a free tool used to map and analyze IT Portfolio assets (systems,

business processes, infrastructure, people, skills, roles, organization, spending...)

and their lifecycle. It was launched in its first version in February 2012.

5.1.6 Relationship to Other IT Disciplines

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http://en.wikipedia.org/wiki/IT_portfolio_management#Relationship_to_other_IT_disciplines

http://en.wikipedia.org/wiki/IT_portfolio_management#Freeware_and_Open_Source_Tools

http://frankitecture.wordpress.com/


IT portfolio management is an enabling technique for the objectives of IT

Governance. It is related to both IT Service Management and Enterprise

Architecture, and might even be seen as a bridge between the two. ITIL v3 calls

for Service Portfolio Management which appears to be functionally equivalent.

5.1.7 Difference between Projects, Programs and Portfolios.

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http://en.wikipedia.org/wiki/IT_portfolio_management#Difference_between_projects.2C_programs_and_portfolios

http://en.wikipedia.org/wiki/ITIL_v3

http://en.wikipedia.org/wiki/Enterprise_Architecture

http://en.wikipedia.org/wiki/Enterprise_Architecture

http://en.wikipedia.org/wiki/IT_Service_Management

http://en.wikipedia.org/wiki/IT_Governance

http://en.wikipedia.org/wiki/IT_Governance


A project is managed with a clear end date in mind, and according to a set

scope and budget. It has a single easily definable tangible output. E.g. a

list of requirements, a new system or an improved process.

A program is a collection of two or more projects sharing a common goal.

Program managers control dependencies and allocate resources across

projects.

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A portfolio is a group of related initiatives, projects and/or programs that

attain wide reaching benefits and impact.

5.2 Application Portfolio Management

5.2.1 Introduction of APM

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IT Application Portfolio Management (APM) is a practice that has emerged in mid

to large size Information Technology (IT) organizations since the mid 1990s.

Application Portfolio Management attempts to use the lessons of financial

portfolio management to justify and measure the financial benefits of each

application in comparison to the costs of the application's maintenance and

operations.

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5.2.2 Evolution of the Practice

Likely the earliest mention of the Applications Portfolio was in Cyrus Gibson and

Richard Nolan's HBR article "Managing the Four Stages of EDP Growth" in 1974.

Gibson and Nolan posited that businesses' understanding and successful use of

IT "grows" in predictable stages and a given business' progress through the

stages can be measured by observing the Applications Portfolio, User

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Awareness, IT Management Practices, and IT Resources within the context of an

analysis of overall IT spending.

Nolan, Norton & Co. pioneered the use of these concepts in practice with studies

at DuPont, Deere, Union Carbide, IBM and Merrill Lynch among others. In these

"Stage Assessments" they measured the degree to which each application

supported or "covered" each business function or process, spending on the

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application, functional qualities, and technical qualities. These measures provided

a comprehensive view of the application of IT to the business, the strengths and

weaknesses, and a road map to improvement.

APM was widely adopted in the late 1980s and through the 1990s as

organizations began to address the threat of application failure when the date

changed to the year 2000 (a threat that became known as Year 2000 or Y2K).

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During this time, tens of thousands of IT organizations around the world

developed a comprehensive list of their applications, with information about each

application.

In many organizations, the value of developing this list was challenged by

business leaders concerned about the cost of addressing the Y2K risk. In some

organizations, the notion of managing the portfolio was presented to the business

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people in charge of the Information Technology budget as a benefit of performing

the work, above and beyond managing the risk of application failure.

There are two main categories of Application Portfolio Management solutions,

generally referred to as 'Top Down' and 'Bottom Up' approaches. The first need in

any organization is to understand what applications exist and their main

characteristics (such as flexibility, maintainability, owner, etc.), typically referred

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to as the 'Inventory'. Another aspect of APM is to gain detailed understanding of

the applications in the portfolio by parsing in the application source code and its

related components into a repository database Application mining tools, now

marketed as APM tools, support this approach.

Hundreds of tools are available to support the 'Top Down' approach. This is not

surprising, because the majority of the task is to collect the right information; the

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actual maintenance and storage of the information can be implemented relatively

easily. For that reason, many organizations bypass using commercial tools and

use Microsoft Excel to store inventory data. However, if the inventory becomes

complex, Excel can become cumbersome to maintain. Automatically updating the

data is not well supported by an Excel-based solution.

Finally, such an Inventory solution is completely separate from the 'Bottom Up'

understanding needs.

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5.2.3 Business Case for APM

According to Forrester Research, "For IT operating budgets, enterprises spend

two-thirds or more on ongoing operations and maintenance."

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It is common to find organizations that have multiple systems that perform the

same function. Many reasons may exist for this duplication, including the former

prominence of departmental computing, the application silos of the 1970s and

1980s, the proliferation of corporate mergers and acquisitions, and abortive

attempts to adopt new tools. Regardless of the duplication, each application is

separately maintained and periodically upgraded, and the redundancy increases

complexity and cost.

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With a large majority of expenses going to manage the existing IT applications,

the transparency of the current inventory of applications and resource

consumption is a primary goal of Application Portfolio Management.

This enables firms to:

1) Identify and eliminate partially and wholly redundant applications,

2) quantify the condition of applications in terms of stability, quality, and

maintainability,

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3) quantify the business value / impact of applications and the relative importance

of each application to the business,

4) Allocate resources according to the applications' condition and importance in

the context of business priorities.

Transparency also aids strategic planning efforts and diffuses business / IT

conflict, because when business leaders understand how applications support

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their key business functions, and the impact of outages and poor quality,

conversations turn away from blaming IT for excessive costs and toward how to

best spend precious resources to support corporate priorities.

5.2.4 Portfolio

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Taking ideas from investment portfolio management, APM practitioners gather

information about each application in use in a business or organization,

including the cost to build and maintain the application, the business value

produced, the quality of the application, and the expected lifespan. Using this

information, the portfolio manager is able to provide detailed reports on the

performance of the IT infrastructure in relation to the cost to own and the

business value delivered.

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5.2.5 Definition of an Application

In application portfolio management, the definition of an application is a critical

component. Many service providers help organizations create their own

definition, due to the often contentious results that come from these definitions.

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Application software — An executable software component or tightly

coupled set of executable software components (one or more), deployed

together, that deliver some or all of a series of steps needed to create,

update, manage, calculate or display information for a specific business

purpose. In order to be counted, each component must not be a member

of another application.

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Software component — An executable set of computer instructions

contained in a single deployment container in such a way that it cannot be

broken apart further. Examples include a Dynamic Link Library, an ASP

web page, and a command line "EXE" application. A zip file may contain

zero or more software components because it is easy to break them down

further (by unpacking the ZIP archive).

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Software application and software component are technical terms used to

describe a specific instance of the class of application software for the purposes

of IT portfolio management. See application software for a definition for non

practitioners of IT Management or Enterprise Architecture.

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The art and practice of Software Application Portfolio Management requires a

fairly detailed and specific definition of an application in order to create a catalog

of applications installed in an organization.

5.2.6 The Requirements of a Definition

The definition of an application has the following needs in the context of

Application Portfolio Management:

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It must be simple for business team members to explain, understand, and

apply.

It must make sense to development, operations, and project management

in the IT groups.

It must be useful as an input to a complex function whose output is the

overall cost of the portfolio. In other words, there are many factors that

lead to the overall cost of an IT portfolio. The sheer number of applications

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is one of those factors. Therefore, the definition of an application must be

useful in that calculation.

It must be useful for the members of the Enterprise Architecture team who

are attempting to judge a project with respect to their objectives for

portfolio optimization and simplification.

It must clearly define the boundaries of an application so that a person

working on a measurable 'portfolio simplification' activity cannot simply

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redefine the boundaries of two existing applications in such a way as to

call them a single application.

Many organizations will readdress the definition of an application within the

context of their IT portfolio management and governance practices. For that

reason, this definition should be considered as a working start.

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5.2.7 Examples

The definition of an application can be difficult to convey clearly. In an IT

organization, there might be subtle differences in the definition among teams and

even within one IT team. It helps to illustrate the definition by providing examples.

The section below offers some examples of things that are applications, things

that are not applications, and things that comprise two or more applications.

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Inclusions

By this definition, the following are applications:

A web service endpoint that presents three web services: Invoice Create,

Invoice Search, and Invoice Detail Get

A service oriented business application (SOBA) that presents a user

interface for creating invoices, and that turns around and calls the Invoice

Create service. (Note that the service itself is a different application).

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A legacy system composed of a rich client, a server-based middle tier, and

a database, all of which are tightly coupled. (E.g. changes in one are very

likely to trigger changes in another).

A website publishing system that pulls data from a database and publishes

it to an HTML format as a sub-site on a public URL.

A database that presents data to an Microsoft Excel workbook that queries

the information for layout and calculations. This is interesting in that the

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database itself is an application unless the database is already included in

another application (like a legacy system).

An Excel spreadsheet that contains a coherent set of reusable macros that

delivers business value. The spreadsheet itself constitutes a deployment

container for the application.

A set of ASP or PHP web pages that work in conjunction with one another

to deliver the experience and logic of a web application. It is entirely

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possible that a sub-site would qualify as a separate application under this

definition if the coupling is loose.

A web service end point that no one uses, but which can be rationally

understood to represent one or more useful steps in a business process.

Exclusions

The following are not applications:

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An HTML website.

A database that contains data but is not part of any series of steps to

deliver business value using that data.

A web service that is structurally incapable of being part of a set of steps

that provides value. For example, a web service that only accepts data

breaks the schema.

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A standalone batch script that compares the contents of two databases by

making calls to each and then sends e-mail to a monitoring alias if data

anomalies are noticed. In this case, the batch script is very likely to be

tightly coupled with at least one of the two databases, and therefore

should be included in the application boundary that contains the database

that it is most tightly coupled with.

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Composites

The following are many applications:

A composite SOA application composed of a set of reusable services and

a user interface that leverages those services. There are at least two

applications here (the user interface and one or more service

components). Each service is not counted as an application.

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A legacy client-server app that writes to a database to store data and an

Excel spreadsheet that uses macros to read data from the database to

present a report. There are TWO apps in this example. The database

clearly belongs to the legacy app because it was developed with it,

delivered with it, and is tightly coupled to it. This is true even if the legacy

system uses the same stored procedures as the Excel spreadsheet.

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5.2.8 Methods and Measures for Evaluating Applications

There are many popular financial measures, and even more metrics of different

(non-financial or complex) types that are used for evaluating applications or

information systems.

Return On Investment (ROI)

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Return on Investment is one of the most popular performance

measurement and evaluation metrics used in business analysis.

ROI analysis (when applied correctly) is a powerful tool for

evaluating existing information systems and making informed

decisions on software acquisitions and other projects. However,

ROI is a metric designed for a certain purpose – to evaluate

profitability or financial efficiency. It cannot reliably substitute for

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many other financial metrics in providing an overall economic

picture of the information solution. The attempts at using ROI as the

sole or principal metric for decision making regarding in-formation

systems cannot be productive. It may be appropriate in a very

limited number of cases/projects. ROI is a financial measure and

does not provide information about efficiency or effectiveness of the

information systems.

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Economic Value Added (EVA)

Total Economic Impact (TEI)

TEI (http://www.forrester.com/TEI) was developed by Forrester

Research Inc. Forrester claims TEI systematically looks at the

potential effects of technology investments across four dimensions:

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cost — impact on IT; benefits — impact on business; flexibility —

future options created by the investment; risk — uncertainty.

Business Value Of IT (ITBV)

ITBV program was developed by Intel Corporation in 2002 The

program uses a set of financial measurements of business value

that are called Business Value Dials (Indicators). It is a

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multidimensional program, including a business component, and is

relatively easy to implement.

Applied Information Economics (AIE)

AIE is a decision analysis method developed by Hubbard Decision

Research. AIE claims to be “the first truly scientific and

theoretically sound method” that builds on several methods from

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decision theory and risk analysis including the use of Monte Carlo

methods. AIE is not used often because of its complexity.

5.3 Project Portfolio Management

5.3.1 Introduction of Project Portfolio Management

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The concept of "project portfolio management" has become popular as a way to

manage business investments in the same way "financial portfolio management"

has been a popular way to manage financial investments. At a high-level, many

of the same concepts are involved. You have a limited amount of money to apply

to your business. You want to manage this money as a portfolio to maximize the

overall value and to allow you to reach your goals. A portfolio management

process provides a way to select, prioritize, authorize, and manage all of the work

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in the organization including completed work, work in progress, and work

approved for the future. Project portfolio management helps you come up with

the baseline used to measure how well you are managing the portfolio to meet

the company's needs.

Organizations are only moderately satisfied with their current project portfolio

management methods, and only a few of them would rate their method as

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excellent. In particular, the methods are not easy to use. These conclusions are

among the results of a survey of sixty-four project management practitioners by

the Center for Business Practices, the research arm of the consulting and training

organization, PM Solutions.

The CBP surveyed senior practitioners with knowledge of their organizations’

project management practices and business results. The survey, Project Portfolio

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Management: A Benchmark of Current Business Practices was designed to

better understand a variety of issues in today’s rapidly changing business

environment.

According to the research, top performing organizations are consistently better in

all phases of PPM (inventory, analysis, planning, tracking, review). Areas where

top performers are particularly better than poor performers include having a

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central repository to capture project information, having information available on

resources, optimizing the project portfolio, planning from a portfolio perspective,

actively balancing resource capacity and demand, and actually making changes

based on optimizing the portfolio.

Some other results of the research include:

• More than half of the respondents have a PPM process in place (64.1%).

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• Organizations’ PPM practices are immature. More than half (60.9%) of

organizations are at level one or two (on a scale of 1-5) in PPM maturity.

• For those organizations that have no PPM process in place, the biggest

challenge to implementing effective PPM is lack of executive support (65.2%),

• There is no standard practice for who (what organizational unit) is responsible

for performing PPM.

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• A significant number of organizations do not have enough resources in place to

make their project portfolios achievable.

Project Portfolio Management: A Benchmark of Current Business Practices is the

first survey to provide benchmark data on a wide variety of portfolio management

issues. The findings are helpful in gauging the value of project portfolio

management and what practices, in general, are most effective.

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5.3.2 Research Approach

This survey on the state of project portfolio management practices was

developed by the Center for Business Practices to better understand a variety of

issues of importance to project management practitioners. The survey provides

benchmark data on the following topics:

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Who is responsible for PPM in the organization?

• How long has PPM been practiced?

• How mature are the PPM processes?

• What processes are in place in each of the PPM phases (inventory, analysis,

planning, tracking, and review & re-planning)?

• What methods are used to prioritize and select projects?

• How often is the portfolio reviewed?

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• How well is the portfolio performing?

• How satisfied is the organization with its PPM process?

• What benefits accrue from PPM?

• What challenges does the organization face in implementing effective

PPM and how do they plan to overcome them?

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Members of the Center for Business Practices Research Consortium were invited

to participate in this web-based Project Portfolio Management survey. The CBP

Consortium is a benchmarking group comprising more than 350 senior

practitioners with knowledge of their organizations’ project management practices

and their organizations’ business results.

Responses were received by 2 May 2003. Sixty-four members responded.

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Twenty-two responding organizations do not have project portfolio management

processes in place and therefore did not respond to questions

5-23. The responses to all questions are presented in total.

For analytical purposes, the responses were also cross-tabulated to show how

Top Performers responded versus Poor Performers. Performance is measured

based on the seven metrics in survey question 19, How well is your project

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portfolio performing? The top 20 percent of organizations, measured by their

portfolio performance on this set of metrics, were singled out, and their responses

were compared to the bottom 20 percent. Thus “Top Performers” means the 20

percent of organizations whose portfolios perform the best in terms of the seven

metrics in question 19 and “Poor Performers” means the 20 percent of

organizations who performed the worst in terms of those metrics.

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5.3.3 Observations

Observations about All Organizations

More than half of the respondents have a PPM process in place (64.1%).

Organizations that have no PPM process in place are much more likely to be

small in size (21.7% with sales under $10 million; 21.7% with sales over $3

billion) compared with organizations that have PPM processes in place (10.9%

with sales under $10 million; 35.9% with sales over $3 billion).

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Organizations’ PPM practices are immature. More than half (60.9%) of

organizations are at level one or two (on a scale of 1-5) in PPM maturity.

For those organizations that have no PPM process in place, the biggest

challenge to implementing effective PPM is lack of executive support (65.2%), but

not well developed project management processes (52.0%) and lack of broad

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organizational support (52.2%) were also issues. For those with PPM in place,

the biggest challenge is in collecting project metrics (65.8%). Lack of broad

organizational support (44.7%) and lack of information on resources (50.0%)

were also major issues.

Observations about Organizations with PPM Processes in Place

Almost all (97.5%) organizations rate PPM important to the organization.

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PPM is practiced at both the business unit and enterprise levels in most

organizations (52.5%). Where PPM is practiced at the business unit level only, its

most office practiced in information technology (27.5%).

In general, PPM is new to organizations. More than half (53.8%) of the

organizations have been practicing PPM for less than two years.

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At the same time, almost quarters (23.1%) of the organizations have been

practicing PPM for more than five years, indicating that many organizations have

had time to improve their PPM practices.

Most organizations (85.0%) have developed their PPM processes themselves

(rather than hiring consultants or implementing PPM software).

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There is no standard practice for who (what organizational unit) is responsible for

performing PPM.

Organizations are fairly strong in their portfolio inventory practices. Most

organizations have an inventory of their projects, with documented schedules and

budgets. They are particularly weak, however, when it comes to calculating risk

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levels. And may organizations do not have information about available resources

documented.

In analyzing their portfolios, organizations are strong in mapping their projects to

business strategy, but fairly weak in modelling alternative portfolios and

optimizing their portfolios.

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A significant number of organizations do not have enough resources in place to

make their project portfolios achievable.

Most organizations monitor and report project performance.

Organizations use a wide variety of methods for selecting and prioritizing

projects. Ranking was the method used by a majority of organizations

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(71.8%), but organizations used a mix of comparative, financial, strategic

planning, optimization and software-specific methods. Microsoft Project

2002 Enterprise is the most-used software for PPM (23.1%) followed by

Primavera Teamplay (17.9%).

Organizations usually review their portfolios monthly (34.2%) or quarterly

(36.8%).

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In determining how well project portfolios are performing, respondents say their

projects are generally aligned with the organizations’ business objectives. Their

portfolios, however, rate lowest in having the right number of projects and having

data available to effectively evaluate the projects. Many organizations also have

issues with projects done on time.

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Organizations are only moderately satisfied with their current PPM methods and

very few would rate their method as excellent. In particular, the methods are not

easy to use. For many organizations PPM is not truly used to make go/kill

decisions.

The primary benefits that PPM offers organizations is in better aligning projects to

business strategy and working on the right projects. Many organizations agree

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that PPM has led to increased cost savings. But many organizations have not

seen the benefit of eliminating project redundancies or killing poor projects. The

least beneficial aspect is in allocating resources optimally.

Most organizations do not know their return on investment for implementing PPM.

Of those that do, most (20.6%) see an ROI of 5%-

25%.

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Observations on Top Performers versus Poor Performers

Top Performers have been practicing PPM much longer than Poor

Performers and they are at a much higher level of PPM maturity.

Top Performers are consistently better at all phases of PPM (inventory, analysis,

planning, tracking, review). Areas where Top Performers are particularly better

5-84


than poor performers include having a central repository to capture project

information, having information available on resources, optimizing the project

portfolio, planning from a portfolio perspective, actively balancing resource

capacity and demand, and actually making changes based on optimizing the

portfolio.

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Top Performers use ranking methods for project selection/prioritization more than

Poor Performers. Also a significant number of Top Performers use Microsoft

Project 2002 Enterprise. Top Performers also use a wider variety of

selection/prioritization methods and, in particular, use on strategic planning

methods as their dominant PPM method much more than Poor Performers.

5-86


Top Performers consistly use PPM to make Go/Kill decisions far more often than

Poor Performers.

Top Performers were far more likely to know the ROI of PPM than Poor

Performers (not one Poor Performer knew its ROI).

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Top Performers were far more likely to have executive support and a business

case for PPM than Poor Performers.

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