The Impact of Project Portfolio Management on Information Technology Projects

INTRODUCTION

Recently, Information Technology (IT) has moved beyond the implementation of IT applications to an age of IT-enabled change. The trend towards increasing use of IT continues and the challenge remains how to better manage IT projects in order to maximize their economic benefits. Part of that challenge can be tackled by “doing projects right” and part by “doing the right projects” [1]. While Project Management concentrates primarily on the former, Project Portfolio Management, hereafter referred to as PPM, is focussed on the latter. Contrary to Project Management, which focuses on a single project, and Programme Management, which concerns the management of a set of projects that are related by sharing a common objective or client, or that are related through interdependencies or common resources, PPM considers the entire portfolio of projects a company is engaged in, in order to make decisions in terms of which projects are to be given priority, and which projects are to be added to or removed from the portfolio (see also Lycett et al. [2]).

PPM has largely developed around the following elements: providing a centralized view of all the projects in an organization, enabling a financial and risk analysis of projects, modeling interdependencies between a family of projects, incorporating constraints on resources shared between projects, enabling prioritization and selection of projects, ensuring accountability and governance at the portfolio level, allowing for portfolio optimization and providing support in the form of standardized processes and software tools.

However, despite the relatively extensive literature on PPM (see sections 2 and 3), evidence of its value has been rather anecdotal. It is unclear whether there are specific PPM elements that add more value than others or indeed, whether they add value at all. It is for these reasons that we decided to investigate the potential for increasing business value through the application of PPM techniques to IT projects.

The first contribution of this paper is the development of a classification scheme for the adoption level of PPM across a diversity of organizations. Secondly, we identify the impact of the PPM adoption level on project performance by investigating the correspondence between the adoption level and reported project-related problems on the one hand and observed positive elements in projects on the other. Finally, we suggest a phased implementation process for the adoption of PPM and describe the challenges that organizations might face in each phase.

The paper is organized as follows. Sections 2 and 3 contain a literature review of the theories, models, and processes presented for PPM, reviewed according to a historic and a thematic perspective. The historic perspective provides a view of how the field has developed over time, while the thematic perspective summarizes the main themes identified in the literature. Section 4 describes the objectives and hypotheses of this study, as well as the methodology used, with the general results presented in Section 5. In Section 6, we present a classification for adoption levels of PPM, and in Section 7 we investigate the impact of PPM and project performance, highlighting the managerial implications of this analysis. In Section 8, we provide a phased implementation plan. Section 9 contains a summary and our conclusions.

LITERATURE REVIEW: A HISTORIC PERSPECTIVE

The field of portfolio management owns its origins in a seminal paper written in 1952, in which Harry Markowitz [3] laid down the basis for the Modern Portfolio Theory (MPT). MPT allows determining the specific mix of investments generating the highest return for a given level of risk. Whereas MPT was initially developed for financial investments, in 1981, McFarlan [4] provided the basis for the modern field of PPM for IT projects. According to McFarlan, management should also employ a risk-based approach to the selection and management of IT project portfolios. He observed that risk-unbalanced portfolios could lead an organization to suffer operational disruptions or leave gaps for competitors to step in.

In 1992, Wheelwright and Clark [5] developed a framework for categorizing projects that they called the Aggregate Project Plan. This plan allows for an overview of the project portfolio along two dimensions, (1) the extent of changes made to the product, and (2) the degree of process change, leading to four categories of projects (in increasing order of change): derivative projects, platform projects, breakthrough projects, and R&D projects (for complete definitions see [5]). This framework can be used to identify gaps in the portfolio or potential resource shortages.

 

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LITERATURE REVIEW: A THEMATIC PERSPECTIVE

METHODOLOGY & HYPOTHESES

ADOPTION OF PPM PROCESSES: KEY RESULTS

A CLASSIFICATION ON THE ADOPTION OF PROJECT PORTFOLIO MANAGEMENT

THE IMPACT OF PROJECT PORTFOLIO MANAGEMENT

A PHASED IMPLEMENTATION PLAN FOR PPM

CONCLUSIONS

REFERENCES

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