While there is no single right way to do IT project portfolio management, there are best practices that all PPM specialists agree on.
The first such best practice is to establish the portfolio. The three essential steps required in building and organizing your first project portfolio are:
Step 1: Build
PPM begins with IT building a single collection of projects along with their fundamental informational facts. All projects, active and requested, should be placed into a single database.
To make certain that a comprehensive inventory baseline is built you must ensure that IT submits all IT-specific projects as well, such as network upgrades, PC refresh programs, server consolidation efforts, etc. (These types of IT-specific projects should be the result of proactively managing the existing IT assets -- the other large component of the overall IT portfolio.)
The critical descriptive elements for a project include name, organization, sponsor, scope, duration, estimated costs, estimated time frames and assigned IT resources.
If the project is currently active, include a summary of the project's health, such as actual costs v. estimated costs and estimated completion date.
Keep in mind that a company's first attempt at collecting all the data will be a chore, so keeping the collection exercise and the initial database structure simple is critical. A popular format is to amass the projects in a spreadsheet.
It is critical that the project repository not only provides a view of the current projects being developed, but also provides a view of potential projects. At a minimum, a rolling two-year road map for key IT-related business projects and infrastructure platforms should be maintained.
The portfolio and roadmap should be updated on a regular basis, throughout the year rather than creating a last-minute portfolio for the budget forecast.
Step 2: Evaluate
Attempting to schedule every requested project is an indicator of a miss-managed project pipeline. Ultimately, the resulting pipeline of IT projects should be smaller than the original list of requested projects.
Vilfredo Pareto, the Italian economist stated in his 80/20 rule, "A minority of input produces the majority of results."
This "Pareto Principle" applies to the project portfolio repository as well. The top 20% of the projects will return 80% of the business benefits, but determining the top 20% of the projects doesn't need to be difficult. The repository of projects should be evaluated on project health, business value and duplicate criteria.
The purpose of this activity is to eliminate the non-essential project efforts, identify the group of projects for resource and funding reductions, and projects that should be considered for initial funding.
One approach to accomplishing this exercise is to ask business unit executives and their staff to review, eliminate and rank the projects being requested from their specific areas.
Based on estimates provided by industry research firms, a company can expect between 30% and 40% of the initially listed projects to either be removed from the list or consolidated with other similar and duplicate projects.
This exercise itself has the potential to save an organization millions of dollars that would have been inappropriately spent on low-value and no-value projects.