PPM: Deciding Where to Begin

“Should I start with project portfolio management (PPM) or asset portfolio management (APM)?” Nearly every time I engage a client on the topic and benefits of IT portfolio management I am asked this question.

As I’ve discussed in previous articles, the IT portfolio is comprised of two distinct sub-portfolios. They are the project portfolio and the asset portfolio.

While the project portfolio governs the spend of IT investment dollars for building new systems capabilities, the asset portfolio provides direction over the money spent maintaining the existing IT assets already deployed in the company.

These IT assets I speak of include hardware, software, data, processes, and IT’s human resources.

The practice of portfolio management applied to each of the sub-portfolios provides exceptional, but unique, benefits. But, before starting a formal portfolio management practice, an IT executive needs to understand the difference between these groups of benefits and match them up against his organization’s most pressing needs.

In doing so, a CIO can reap the largest advantages of portfolio management for their company and improve his department’s image in terms of reliability, integrity and trustworthiness in the eyes of the business executives. In my experience, this has always been a welcomed benefit.

Know Thyself

As mentioned, the organizational benefits of each sub-portfolio (i.e. project and asset) are different. To get a clear understanding of these differences a comparison and contrast of the benefits is required. Below is a side-by-side look at the benefits that each sub-portfolio brings to the table:

Project Portfolio Management:

  • Dynamically align IT-enabled projects with your business objectives.
  • Maximize the ROI of IT investments.
  • Provide visibility in the project selection and prioritization process.
  • Get CEOs, CFOs, and CIOs to speak the same language, share risk, and collaborate in the investment decision-making process.
  • Encourage business leaders to think “team,” not “me,” and to take responsibility for projects.
  • Consolidate and reduce the number of redundant projects and make it easier to avoid inappropriate projects.
  • Redirect 20% – 30% of discretionary IT spending from low value projects to high value projects.
  • Allow planners to schedule resources more efficiently.
  • Asset Portfolio Management:

  • 20% – 30% reduction of support and operating costs.
  • Improve budget predictability.
  • Increase utilization of existing IT assets and capacity.
  • Minimize unanticipated outages.
  • Allow planners to schedule resources more efficiently.
  • Notice that the benefits of project portfolio management (PPM) focus on identifying and maximizing the business value of IT projects and improving the working relationship between the IT department and the lines of business.

    Because the PPM process evaluates a project request from multiple perspectives, such as support of business goals and cost/benefit ROI measures, it cannot be accomplished in isolation by IT alone.

    In fact, the process requires participation from the business lines and the finance department. Thus, forcing the business to learn about IT and IT to learn the business.

    On the other hand, the benefits of asset portfolio management (APM) focus on cost savings and squeezing as much usage and capability out of the IT assets already in place throughout the IT environment.

    APM is about disciplines such as lowering administrative costs at each phase of hardware and software lifecycles, standardizing infrastructure, and ensuring compliance with regulations and corporate security policies.

    By their nature, these activities are typically the responsibility of IT and do not require much participation from business constituents.

    Determining the appropriate portfolio management discipline for a company is based on understanding the unique combination of the IT department’s credibility throughout the business community and the company’s overall dependency on information and the technology that manages and maintains it.

    The following matrix, developed and promoted by Howard Rubin of the Meta Group, provides a straightforward mechanism that you can use to determine which portfolio management discipline is the right one to start with in your specific case.

    Dependency of business
    on information technology
    High Project Investment Portfolio Decisions Project and ALL Asset Portfolio Decisions
    Low Infrastructure & Applications Asset Portfolio Decisions Information, Process & People Asset Portfolio Decisions
    Low High
    Credibility of IT organization throughout business community