Demystifying Project Portfolio Management (PPM)

Project Portfolio Management is a critical concept and tool for IT Managers. Have you cut through the hype so you can use this tool?


Project Portfolio Management (PPM) and Project Portfolio Rationalization are terms that have been much abused. Like any other flavor of the month, these buzzwords are on the lips of everyone who is anyone in IT. Unfortunately, like any other buzzword, they are used more than they are understood.

This series of articles is designed to help you understand this extremely important concept and tool for IT Management.

A Brief History of IT: IT as a Cost

Before we dive into the definition and frameworks for PPM, we need to understand some underlying concepts. These concepts are best understood in the historical context that they developed in.

For the longest time information technology was treated as a cost. You “buy” computers. You “buy” applications. You have IT Payroll. Etc. In other words, one “pays a price” for IT – with little or no thought on why that cost is being uncured or what is the benefit other than “we need computers” or “we need reports”.

Looking cool or keeping up with the Joneses was the order of the day for the first 2-3 decades of IT. Yes, there was a time when just having a computer made you look cool and who does not want to look cool! Companies also bought computers because “my competitor has a computer so I must also have one” was the motivating factor.

There is nothing unusual about the path organizations took to adopt computers because that is the usual path for the adoption of any innovation. The cool kids buy an innovation first. Then their pals follow. The masses are the last to jump on the bandwagon. But we digress…

So, why did this sheep mentality continue? In other words, why did people continue to treat IT as a cost?

For one, the adoption of an innovation takes time as we discussed earlier. But a more powerful reason is that this thinking did not hurt anyone. Everyone was treating IT as a cost and hence no one was relatively worse off than the others i.e. there was competitive parity. In the absence of a clear competitive differentiation – advantage or disadvantage – there is little incentive for change.

Then, the impact of this thinking was not felt in another important area – the pocketbook. IT was still not ingrained in every aspect of business operations. Consequently, IT spending was low and hence so was the attention it grabbed within the organization. IT was not on anyone’s radar as a major imperative or focus of attention.

Flaws in the Paradigm Exposed

Slowly but surely major aspects of every organization were enabled by IT. As IT grew so did the expenditure on IT. Slowly some organizations realized that IT could give them a leg up so they invested in specific areas of IT and gained competitive differentiation. Their competitive advantage became a concern for their competitors.

Suddenly, IT was on everybody’s radar.

“IT as a cost” paradigm has inherent flaws that have been exposed over time:

  1. Right Spending Level: one does not know how much to spend because there is no connection with anything that tells you how much is enough
  2. Minimal Spending: Then, the very mention of “cost” is to elicit a natural reaction – spend the least amount! Consequently, organizations kept their spending on IT as low as possible and as a result shifted their expenditure to the wrong things in other functions of the organization. Yes, there is an inherent flaw with money managers – “optimization” is an equation that works back from “acceptable” and “sustainable” returns not forward from “what is the least amount we must spend to generate the maximum returns. The whole “quarterly” reports and their inherent flaws are a direct result of this thinking. But that discussion is for another day.
  3. Disconnect between business and IT – the former is a creature of value and only understands “returns”; the latter only understood cost and was treated as such. This fundamental difference in thinking turns into a vicious cycle that still hurts value creation in many organizations.

Consequently, the “IT is a cost” paradigm results in missed opportunities for value creation. When, where, how much etc. are the focus of any decent IT Strategy framework!

These flaws were exposed as IT gained in operations and the resulting cost. Now, people started to ask the obvious – what am I getting for this money? How can I get the biggest bang for my IT buck? And other questions with the same focus – is there is value side to this IT equation?

Move to IT as an Investment

Hence, the move to treat “IT as an investment,” i.e. are there returns related to IT expenditure, gained momentum.

This change in the IT value equation has had a fundamental shift in mindset about spending on IT:

  1. IT Assets: IT components, such as computers and software, are no longer “things” or “commodities” but “assets” i.e. they have value. This is analogous to the difference between buying furniture and stock in a company. Unless you are a furniture store, the former is expenditure in a depleting commodity. The latter is an investment in an opportunity for long term value creation
  2. IT Value: Consequently, the management of these investments in IT requires more than getting the “best” price. In other words, the IT value equation has changed dramatically – we now have a “return” part to this equation that balances the “cost” side.
  3. IT Initiatives: Now, we also need to think in terms of units of investment. One cannot gauge the value of buying an IT component such as a computer in isolation. What this computer will be used for determines its “value” – hence, focus on the process that creates a “product” or “sub assembly” that has encapsulated and measurable “value”. In the IT World – a process driven world – we banked upon the familiar concept of initiatives or projects.

Next, we look at each of these in greater detail and see how they got together to create the discipline of Project Portfolio Management (PPM).

About the Author:

Sourabh Hajela is a management consultant and trainer with over 20 years of experience creating shareholder value for his Fortune 50 clients. His consulting practice is focused on IT strategy, alignment and ROI. For more information, please visit IT Strategy Consulting.

Related Categories

Related Topics

Related Articles

Implementing Application and Project Portfolio Management

Enabling Enterprise Transformation with Application and Project Portfolio Management (APM and PPM)

5 Steps to Project Portfolio Management (PPM)

 This presentation walks you through the five steps to Project Portfolio Management (PPM).

A Framework for IT Project Portfolio Management

This paper discusses a case study to implement a new information technology project portfolio management framework and process - "the new process aims at better identifying, evaluating and balancing projects in the light of business strategy"

Application Lifecycle Optimization

 By proactively identifying, eliminating, or remedying poorly performing application assets, Applications Rationalization helps companies reduce costs, target efforts to the areas of highest return, and maximize the business value of their applicati...

e-Book: A Guide to Project Portfolio Rationalization

This document discusses Project Portfolio Rationalization in the context of risk management. An excellent resource for the CIO who wants to understand PPM and use it to manage risk and increate shareholder value in their organization. Excellent Read!...

Enterprise Portfolio Management (EPM)

 This paper defines enterprise portfolio management and describes its use in implementing business strategy.

How to Implement Project Portfolio Management (PPM)

This presentation delves into the process and governance of project portfolio management (PPM) in the enterprise.

Introduction to OPM3

 This presentation provides an overview of project, portfolio, and program management and Organizational Project Management Maturity Model (OPMMM)

Introduction to Project Portfolio Management

This presentation provides an introduction to project portfolio management.

Introduction to Project Portfolio Management (PPM)

 This presentation provides an introduction to project portfolio management (PPM).

IT Governance Portfolio and Project Management

This presentation provides an overview of IT Governance Portfolio and Project Management in State Government

IT Portfolio Management

 This paper defines Information Technology (IT) Portfolio Management, describes its benefits, discusses a maturity model for it and presents a case study.

IT Portfolio Management Process

 Overview of Disney's IT portfolio management process.

Maximizing Business Value of Information Technology Investments

This presentation discusses key IT imperatives, drivers and the use of tools such as Project Portfolio Management (PPM) to maximize the business value of information technology investments.

Portfolio Management Best Practices

 This presentation discusses a best practices based project portfolio management framework and critical success factors for project portfolio management. This framework can be easily adapted to IT Project Portfolio Management.

Project Management Overview

An introduction to project management

Project Portfolio Management (PPM) For Value

 Project Portfolio Management (PPM) and Application Lifecycle Management (ALM) research paper on best practices to realize value from your ALM/PPM investments.

Project Portfolio Management (PPM) Framework and Process

 Project portfolio management (PPM) framework and process that connects strategy with execution.

Project Portfolio Management (PPM) Maturity Model

This paper describes Gartner's program and portfolio management maturity model which can be used to assess progress against best practice goals.

Project Portfolio Management (PPM) Using Analytic Hierarchy Process (AHP)

 This presentation provides an overview of project portfolio management (PPM) and analytic hierarchy process (AHP).

Project Portfolio Management Best Practices

 This presentation discusses the common mistakes CIOs make while managing their project portfolios and ways to overcome them.

Project Portfolio Management Definition

What is project portfolio management? This document defines project portfolio management (PPM), key terms used in PPM, and key roles that enable the PPM process.

Project Portfolio Management Implementation Best Practices

This paper discusses project portfolio management implementation in the context of the overall project portfolio management (PPM) process - as one of its phases - and also as an individual project.

Project Portfolio Management to Improve Enterprise Performance

 This paper discusses two approaches to help improve strategy and project alignment, and improve project performance across the enterprise.

Project Portfolio Management Tool Comparison

This research report evaluated the major project and program portfolio management tools and vendors to compare their capabilities and make a recommendation on the "best of breed." You can use the evaluation criteria and framework to conduct your own ...

Project Portfolio Management Tool Comparison

 Forrester's evaluation of leading project portfolio management (PPM) vendors. Who won?

Project Portfolio Management Tools and Techniques

This presentation describes IT Project Portfolio Management Tools and Techniques.

Project Portfolio Planning Methodology

 The Project Portfolio Planning (P3) Methodology provides an organized and comprehensive process for developing project portfolios that support the business. The methodology is most appropriate for organizations that continually generate myriads of ...

The Case for Project Portfolio Management (PPM)

 Project Portfolio Management (PPM) has gained favor with CIOs - this paper discusses the rapid adoption of PPM, the definition of PPM, and best practices in PPM implementation.

Using IT Portfolio Management to Increase IT ROI

This presentation defines portfolio management, and discusses the three types of portfolios and their management

Why are IT Projects Late and Over Budget?

 How can project portfolio management (PPM) and project management techniques improve project performance?

Posted on 05/26/2009 by

Demystifying Project Portfolio Management (PPM) author sourabhhajela



For ThoughtLeader

CIO Index

Our Focus is On Your Agenda

CIO Index is the world's largest professional network for CIOs - of the CIO, for the CIO, by the CIO. 

Over 75,000 CIOs and other IT Executives use CIO Index to Learn, Network and Share.


Cioindex, Inc.

  • (+1) 800-309-3550
  • Mon - Fri 9:00am - 5:00 pm
  • 375 North Stephanie St., Ste 1411, Henderson, NV 89014