Lee Merkhofer Consulting Priority Systems
Tools for Project Portfolio Management

Project Portfolio Management Tools:

Which Approach is Best?

Part 2: Tool Differences

Part 1 identified available tools for project portfolio management. This part describes key differences among the tools.

All tools for project portfolio management (PPM) share a common feature; namely, a database containing information on proposed and/or ongoing projects. Typical project data include the project description, owner, cost estimates, resources required, schedule, anticipated project benefits, and so forth. The tools allow project data to be rolled-up to the portfolio level and then sliced and diced in various ways. The idea is to provide a bird's eye view of the portfolio, a view that aids decision making by clarifying, among other things, the project mix. Data management features make it easy to add, delete and edit project data, and to otherwise manage the project database. At minimum, if the tool is advertised as PPM, it will allow you to select and simultaneously view data for multiple projects.

Beyond that, as indicated by the side box below, available PPM tools differ in many ways. In this part we explore some of these differences.

Project Prioritization

In addition to providing a repository for project data, nearly all PPM tools provide some project prioritization or portfolio optimization capability. The quality of this capability, however, differs dramatically. The simplest tools merely allow users to manually rank and/or select projects. Most tools go at least one step further and provide capability to score projects based on pre-specified or user-defined criteria. In many cases, however, project scoring is limited to subjective judgments regarding how well individual projects support corporate objectives and strategies (an approach commonly referred to as strategic alignment). Simple scoring methods are almost always inaccurate or biased and therefore incapable of identifying value maximizing project portfolios.

Tools with more sophisticated analytics evaluate projects based on simulating or otherwise estimating the impacts or consequences of conducting those projects. Some consider the consequences of not-doing the project. Some incorporate Monte Carlo analysis or other techniques for quantifying and understanding the impacts of risk and uncertainty. A very few include methods for determining the dollar value to the organization of the forecast project consequences using rigorous valuation methods. More discussion of these important differences is provided below and in subsequent parts of this paper.

Target Applications

As indicated in the tool table, some tools are intended for specific industries and types of project investments, whereas others are general-purpose. Being advertised for a specific industry or type of project may mean that the tool incorporates specialized project evaluation logic appropriate for that industry or project type. Alternatively, it may merely mean that "templates" have been created that make it more convenient or easier to apply the vendor's generic logic to the specific types of projects common to that industry. Tools that are truly designed for specific industries build their methodology around the business processes, customer segments, and success factors specific to that industry. Specialized tools are more likely to incorporate models for estimating the benefits produced if the project is conducted (since the mechanisms by which projects create benefit will be industry- and project-type specific).

A Tool Designed for IT Projects Is Not Likely to Work Well for Non-IT Projects

"As far as extending PPM across the enterprise, the biggest problem we see is when non-technical business users are forced to use a PPM tool that's designed for IT use. Inevitably it doesn't adapt to meet their governance, portfolio management or even project execution needs without significant, costly and time-consuming customization work." [3]

The biggest subset of targeted PPM tools consists of those aimed at information technology (IT) projects. IT is a popular application because it is easy to identify IT needs, costs are high, and IT spending is typically viewed as discretionary (so prioritizing to decide which projects to conduct makes sense). IT projects are often difficult to justify based on financial analysis alone, and the tools make it easy to define various non-financial measures for evaluating and comparing projects. Typically, tools for IT PPM prioritize projects based on estimated financial impacts (e.g., cost cutting potential) plus strategic alignment, although some tools incorporate a more sophisticated approach to valuing IT projects based on real options analysis that account for IT impacts on organizational capability. IT PPM tools may include features to support the tracking and management of application assets created as a result of an IT deployment project, referred to as application project management (APM). Examples of providers with tools designed for IT include Artemis, Cardinis, Compuware, Daptiv, IBM, ITM, Planview, and Serena.

Another large category consists of tools for managing projects to develop new products. These tools typically represent product development as a staged decision process. Examples include products from Augio, BOT International, CA, Gensight, Instantis, SmartOrg, Sopheon, and Telelogic. Tools for pharmaceutical PPM comprise a special case, as the drug development stages are well-defined, compliance driven, and have other distinguishing characteristics. Examples include the tools from Enrich, Planisware, and Portfolio Decisionware.

Tools for traditional engineering and construction projects, like those for new products and R&D, distinguish themselves based on capabilities for addressing project risk. Examples of providers of PPM tools aimed at the construction industry include Meridian Systems, Skire, and Oracle (Primavera). Another application requiring strong risk management capabilities is oil exploration. Examples of tools applied to up-stream oil projects include Oracle's Crystal Ball and Schlumberger's (now discontinued) Merak Capital Planning.

Providers of tools for professional services (e.g., Innotas, Oracle, OpenAir, HP, XenLogic) emphasize project staffing and billing. Electric, gas, and water utilities are asset-intensive businesses, and the tools designed for such industries often evaluate projects in terms of their impacts on asset performance (e.g., tools from CopperLeaf, Davies Consulting, and UMS).

Tools aimed at government and government contractors often include functionality designed to satisfy federal project management requirements such as the Clinger-Cohen [1] and Sarbanes-Oxley Acts [2]. BOT International, Compuware, Daptiv, Innotas, VCSonline, for example, advertise features designed to ensure compliance with government mandates.

Tool Sources

Tools can also be distinguishing based on the type of organization that provide them. Consulting companies, software vendors, and service providers all offer PPM tools. In terms of market share, software vendors and software service providers deliver the most tools. Suppliers range from large companies with international sales forces to tiny niche players. The revenue leaders in the PPM tool space include Oracle, Microsoft, CA Technologies, Planview, and HP. Together, they account for almost 50% of sales.

PPM Tool Providers

PPM Tool Providers


Operations research consultants and academics have been delivering customized, portfolio optimization tools for at least two decades, often using Microsoft Excel to create their applications. The industry-specific PPM tools offered by some consulting companies are generalized versions of custom tools created and paid for by their clients. Software vendors began providing commercial PPM tools in earnest beginning around the mid 1990s. Many of the early entrants were start-up's, pioneers who mainly focused on tracking projects and displaying portfolio-level data.

Software vendors with established products for project management quickly recognized the opportunity to add portfolio capability to their products. In essence, they up-sized their project management tools—whereas their original tools were designed to provide support for the planning and control of individual projects, the portfolio versions added features for multi-project management, including multi-user access (through providing a client-server environment), cross-project resource loading, and cross-project data roll-up and reporting. Examples of long-time project management vendors who early on introduced portfolio versions to their product line include Artemis, Niku (now Computer Associates), Planview, and Welcom (now Deltek).

More recently, software giants, including SAP, Microsoft, HP, and Oracle, have entered the PPM space, mostly by acquiring niche players and integrating the products into their offerings. CA Clarity, for example, came from Niku, HP's PPM came from Mercury Interactive, IBM acquired Rational, and Oracle acquired its core offering from Primavera. Microsoft is one of the few large vendors that developed most of its PPM offering in-house.

Generally, the larger software houses offer PPM modularly as a component of an enterprise project management (EPM) or an enterprise resource planning (ERP) "solution"—a software suite intended to address a wide-range of needs faced by a project-based enterprise. For example, the popular Microsoft suite employs its Project Portfolio Server platform to allow organizations to create and manage project portfolios on a central server accessed via its web client, Project Portfolio Web Access. Various modules of Portfolio Server can be activated, including Portfolio Builder, Portfolio Optimizer, and Portfolio Dashboard. The product can be used independently or integrated with Microsoft Project Server and Project Professional, collectively marketed as its Enterprise Project Management Solution.

Tool Types

Another way to distinguish tools is based on the features provided, in particular, whether the tool emphasizes features to support project prioritization and selection (the central theme of portfolio management) or more traditional needs of large project-based organizations.

Tools Focused on Analysis and Optimization

As noted previously, a relatively small fraction of PPM tools provide well-established prioritization and portfolio optimization algorithms. To do so requires incorporating superior analytic capabilities. The sidebox provides a summary of the characteristics often present in tools with this focus. Potentially available features that are typically not provided elsewhere include capability to optimize under multiple constraints, compute project value in dollar units, display the efficient frontier, re-optimize with some projects being forced into or out of the portfolio, identify optimal multi-period strategies (e.g., multi-year project decisions), select project funding levels based on total portfolio funding, compute risk-adjusted project value, and optimize the portfolio subject to achieving specified portfolio performance targets.

Most tools focused on analytics are provided by organizations specializing in operations research and decision analysis, or from industry consultants or software vendors with strong capabilities in these areas. The tools are often industry and/or project-type specific, employing special models and methods of analysis deemed appropriate for the application area. For example, CopperLeaf's PPM tool for utilities accounts for multi-year gains in electric service reliability and uses mixed integer programming to allow for multi-year budget constraints. Schlumberger's tool for oil and gas exploration generates and analyzes portfolios of exploration projects (oil wells) using a genetic search algorithm.

Because analysis involves modeling and models differ from application to application, many PPM tools focused on project selection and prioritization are custom applications created using general-purpose tools for modeling and analysis. An advantage of this approach is that there is typically much more flexibility to tailor the tool and to modify it over time, for example, to expand the scope of application or to incorporate improved methods for simulating project impacts and outcomes. Examples of such tools include (in addition to Excel) @Risk, Analytica, Criterium DecisionPlus, Crystal Ball, and DPL Portfolio. A few companies have developed web-based PPM tools with strong portfolio optimization capabilities that may be fully customized for specific industry applications (e.g., Enrich Consulting's EPS, SmartOrg's Portfolio Navigator, and PwC's PPO). SumOpti delivers customized tools to support portfolio and capacity planning decisions based on a very efficient optimization engine. Some ERP suites include modules that provide portfolio optimization capability (e.g., Microsoft's Portfolio Optimizer).

Tools Focused on Project Management

Because, as stated above, many vendors entered the portfolio space by augmenting their existing project management tools, it should not be surprising that so many PPM tools provide strong project management features even though they may lack portfolio optimization capability. An industry insider put it this way, "As interpreted by the software industry today, PPM is about managing the execution of project work after the decision is made to do the work."

PPM tools focused on project management typically include features to support project planning (e.g., project templates, PERT charts, Gantt charts, critical path analysis, project network diagrams, work breakdown structures, baseline budgeting, financial analysis), communication and collaboration (e.g., email integration, forums, bulletin boards, messaging or instant messaging, team calendars, integration with MS Project), document management (e.g., for project plans, charters, compliance requirements documents), project status tracking (e.g., issue tracking, progress reporting, accounting, earned value management, schedule and cost variance analysis), and post project analysis (e.g., benefits monitoring, surveys, lessons learned). Examples of tools with strong project management features include Pacific Edge, Planview, and Sciforma, as well as giants Microsoft, Oracle, and HP.

Tools Focused on Resource Balancing

The sidebox summarizes characteristics of tools with this focus. Typically, the tools include features for resource management (e.g., resource pools, work requests, people scheduling tools, skills-matching tools) and accounting (e.g., time sheets, expense reporting, billing). PPM tools with strong resource balancing features generally include those provided as modules available within ERP suites, so-called business intelligence tools (such as that provided by Cognos - now IBM - and XenLogic), and PPM tools designed for professional services firms.

It should be noted that, although resource balancing tools support project staffing, such tools do not automate staff assignments. Even PPM tools with the best analytics for portfolio optimization rarely address the mathematical problem of identifying value-maximizing staff assignments. The difficulty is not just mathematical, but the challenge of knowing or estimating the many relationships that would be required before a solution could be computed, such as how the number of people assigned, fraction of time allocated, and phasing affects performance. Rather than optimize the allocation of people resources, nearly all PPM tools with resource balancing capabilities simply support the traditional 3-step process for resource assignment: (1) identify the projects that you'd like to do given the constraints on costs (wherein project costs include labor costs), (2) attempt to phase and stage the desired projects to accommodate people and resource availability, and (3) iterate as necessary.

Delivery Options

Suppliers make PPM tools available to customers in several ways. The tool may be provided as a commercial off-the-shelf standalone desktop application installed on a single computer, or each user may obtain a copy with project data being written to a central database. Alternatively, the application may be installed on the customer's internal client server so as to provide access to multiple users over the local network. Even if the application is installed on your server, users' computers may still need software installed to access it. Web-based tools are a form of server-based applications wherein the users' web browsers serve as the client software—no software need be installed on the machines of individual users. A growing percentage of providers make PPM tools available "on-demand," also referred to as "Software as a Service" (SaaS). The tool supplier or application service provider (ASP) hosts the application, typically, making it available to the customer over the internet. Providers of SaaS tools include @task, Daptiv, Clarizen and Project Insight. Also, many vendors with web-based tools designed for in-house deployment are now offering to host the applications for their customers, thereby including a SaaS option.

Questions for Determining Delivery Method and Hardware Needs

  • Do you want to host the software inside your organiation's firewall, or is hosting on the cloud or other offsite location OK?
  • Will the software/SaaS need to be available with 95% uptime, 99% uptime, and during what hours? (More uptime can be expensive because you'll need redundant hardware in case one fails.)
  • What is the maximum number of users who will be accessing the application simultaneously? (More concurrent users means more hardware.)
  • Can the solution be run on a virtual machine or does it need to be on its own dedicated hardware? (This varies with the number of concurrent users, uptime and cost requirements.
  • What level of data security is needed? (This affects network structure and whether the software is hosted behind your firewall or on the cloud.)

Each approach has advantages and disadvantages. Desktop applications tend to be relatively inexpensive, and continue to work even if the local network is down. Server-based tools allow multiple, simultaneous user access and offer centralized control over the application (but users not connected to the network won't have access). Web-based applications allow users to access the tool from almost any computer, including machines on which you can't install client software (e.g., PDA's and iPhones).

The major advantage to customers of SaaS is little or no initial capital outlay is required to purchase software. Instead, the tools are paid for based on monthly or usage-based fees (see Part 3 for discussion of tool costs). Also, a SaaS deployment may eliminate the need to involve your organization's IT department in the purchase decision. A goal for providers of SaaS tools is to make their products attractive to a broad spectrum of potential clients and to make the incremental costs of each sale as low as possible. Thus, SaaS tools tend to be simple and easy to use, but they generally lack models and analytic capability that are specific to the customer's industry and business situation. SaaS tools almost always include basic features to support collaboration, project management, and resource balancing. Of concern to some organizations are data security issues and the risk that a supplier outage will cut users off the application. In addition, providers of on-demand tools are challenged to integrate their tools with their customers' other tools and data sources.

Part 3 of the paper provides information on tool costs and risks, and offers advice about how to prepare for the tool selection decision.

Notes


  1. A U.S. federal law passed in 1996 that requires federal agencies to apply more rigorous processes to IT spending decisions.
  2. A U. S. federal law passed in 2002 that establishes more rigorous accounting standards and business practices for publicly-held companies.
  3. David Hillson, "Crawl, Walk, Run to PPM Value," reporting on an interview with Stephen Sharp, CEO of ppm software provider PowerSteering, published in Projects@Work, September 28, 2009.
  4. Jeff Monteforte, "Making Sense of PPM Software," CIO Update, May 17, 2005.