As companies have slashed costs, subsequent to merger activity and competitive pressures, a key focus since the end of the technology related expansion of the late 90’s has been managing technology spending effectively. This article describes why the implementation of both project and portfolio management frameworks are important to achieve this objective.

1. A UMT White Paper
Creating a Successful Technology Investment
‘Game-Plan’ by Using Project and Portfolio
Management
By Yorai Linenberg and Gil Makleff
As companies have slashed costs, subsequent to merger activity and competitive pressures, a key focus
since the end of the technology related expansion of the late 90’s has been managing technology spending effectively.
This article describes why the implementation of both project and portfolio management frameworks are important to
achieve this objective.
General
Many leading companies and governmental agencies are using a relatively new and exciting framework that is causing
a fundamental change in how technology investment planning and spending is perceived around the world. In the mak-
ing for quite some time and derived from economic portfolio management theory, ‘Project Portfolio Management’, or
PPM, has evolved into a leading discipline for bridging the gap between IT and the business, turning technology into an
effective tool for achieving competitive advantage.
Many IT Project Management (PM) practitioners and business executives are trying to better understand what PPM is
all about: is it just another name for Project Management? Is it an extension to Project Management? Is it here to stay?
Or is it just another fashionable IT paradigm that is “here today and gone tomorrow?”
In fact, Project Management and Project Portfolio Management are complementary disciplines. One cannot exist with-
out the other. The following figure illustrates the value potential from implementation of both frameworks and the val-
ue lost from only focusing on one or the other.

2. <2>
An illustrative analogy likens a project portfolio to a sports team, where each player (equivalent to a Project) can con-
tribute to the team’s overall success, but only by working in a coordinated fashion with other team members (the
portfolio of projects) can the team win a game (implement its strategy and achieve competitive advantage in the mar-
ket). The coaches’ (executives) role is to mix and match the right group of team members to meet the competitive chal-
lenge at hand. The coaches’ ability to see the ‘big picture’ and to understand team member capabilities enables the
creation of a strategy that builds on these strengths to achieve the desired goals, whether offensive, defensive or a mix.
Background of Project Management
IT departments have been honing their project management abilities over several decades to achieve something that is
best described as the Holy Grail of project management. This quest seeks the comprehensive integration of project
planning and tracking methodologies and tools across the IT organization to increase transparency, communicate the
value of IT spending, and increase the ongoing alignment of IT spending with the company’s overall business strategy.
Many of the management principles that we use today were initially developed in the 1950’s. It was during one of the
greatest technology races in the history of mankind: the race to become the first nation on earth to travel to space. The
Soviet Union surprised the world with its successful launch of the Sputnik unmanned satellite in 1957. This had the
effect of shattering US confidence in its technology supremacy and created the need for better frameworks to track the
progress of large projects and to ensure on time, on budget, on scope deliverables.
The Program Evaluation and Review Technique, or PERT, as it is commonly known, was developed in 1958 by the US
Navy Special Projects Office for the Polaris Submarine Launched Missile program as a direct response to this event.
PERT and other known project management techniques were developed initially for very large scale projects with a
relatively long term perspective. Over time, project management evolved to focus on commercial sector projects that
included large, medium and even small projects.
Selecting
the right
Projects
Delivering the projects
0% 75% 100%
100%
66%
50%
Value Realized
Portfolio
Management
Project
Management
50 % lost value
Working at 75 percent of PM capacity and 66 percent of PPM capacity will
yield only 50 percent of the overall potential value.

3. <3>
In the late 90’s, less emphasis was placed on project management rigor because corporations were spending freely on
projects, in an environment of theoretically unlimited resources, both fiscal and human. Corporations, much like indi-
vidual investors during that period, were bullish on making investments without analyzing the full costs, benefits or
risks involved as long as they perceived that the competition was developing something similar.
As project management tools and techniques developed in IT departments, a virtual barrier evolved between IT and
the business side of the institution. Executives have had difficulty relating to IT’s need for formalization and
‘unnecessary bureaucracy’; on the other hand, IT has had difficulty articulating and communicating the value of IT to
the business side of the company. The underlying assumption was that a project had merit because it was requested by
the business side; this was sufficient rationale for approving project investments and initiating their implementation.
Decisions were often made within business silos, without the “big picture” view and without analyzing potential over-
laps and redundancies or an overall game-plan, causing a lack of trust and coordination between the institution’s busi-
ness and IT groups.
In recent years, however, many reasons have compelled organizations to take a closer look at the projects they under-
take and question the rationale for project implementation. With limited resources, and under the watchful eyes of
boards and shareholders, all investment requests, even if they represent viable value propositions, are being constantly
scrutinized. Having first hand experience with large technology projects that did not provide expected results, or having
heard of implementations that have gone awry, corporations are now more cautious when it comes to allocating their
discretionary spending. Furthermore, in the current environment it has become increasingly important to understand
the costs, benefits, and risks associated with each project idea independently as well as against other projects com-
peting for the same limited resources. Management is faced with the challenge of selecting the optimal set of projects
given the institution’s strategic goals and available resources.
PPM Barriers
Achieving comprehensive project management integration has been elusive and a mostly ineffective effort to restore
order to an area which has typically been chaotic and tactical during the tremendous growth in spending over the last
decade. This spending spree, especially evident in the financial arena (and other service industries as well as in large
government organizations), mirrored the thirst for competitive advantage from technology solutions. So what are the
root causes of our collective inability to achieve satisfactory outcomes over so many years?
The Business Silo “me first” approach…
 In product organizations the line of business (LOB) is a bastion of power leading new business sales and gener-
ating top line results. In most cases this has lead to domination in IT investment decision making regardless of
other product silos in the company. IT is viewed more as a service supplier and less as a partner. Centralization
of IT organizations, in product focused environments, yielded little results as the line of business hired external
technology providers to perform, in a more agile way, what the institution’s internal IT organization
‘unnecessary’ bureaucracy ‘fumbled’ in many cases. Line of business managing directors that need results and
only look at their own silo may not appreciate the aggregate economic impact of a central organization with
common spending patterns and purchasing power.
The Technology Group “laissez faire” approach …
 On the other hand, transparency has not always been the goal of the technology group as well because in many
cases the reward system was tied to project success – on time, on budget, on scope – rather than to the actual
delivery of the strategy. Admitting to a delayed project, or to being over-budget, does not reflect well on IT
managers; it is much easier to create a “black box” that will receive project requests on one side, and deliver a
completed solution on the other (albeit not always the solution that is best for the business).
15 to 20 percent Project Management tool utilization
 The idea of comprehensiveness has been a goal of CIOs since the initiation of PM concepts. Obviously, it may

4. <4>
have different meanings for different executives, but at a high level, it provides the ability to view all project in-
formation in one environment; to make informed investment decisions across projects; and to control expendi-
tures and monitor progress. Unfortunately, the current PM disciplines – and tools – have not provided managers
with the ability to view project information in a comprehensive way. That’s because, in most cases, only 15-20
percent of all discretionary projects in any given organization utilize any formal project management tool. This
low utilization means that the required information is not available in one central location.
Project Portfolio Management (PPM) vs. Project Management (PM): The Main Differentiators
After discussing some of the systemic problems and in order to better understand how PPM and PM complement each
other, we need to understand the main differences between them.
 Focus: PM focuses on a single project at a time. Although it may link to other projects through inter-project de-
pendencies, the focus of the project manger and the stakeholders she reports to is on project related indica-
tors. On the other hand, PPM takes a broader view and looks at the selection and outcome of a set of projects.
The indicator that is critical from the PPM perspective is the portfolio of projects that achieves the greatest stra-
tegic and financial value for the firm.
 Decision making: Decisions associated with a single project – approving it, canceling, or simply changing its re-
source or budget allocation – are usually tactical ones, made independently based on information related to the
project itself. PPM takes the decision making one level higher, allowing sets of projects to be evaluated as a sin-
gle entity based on their contribution to the overall strategy and taking into account budget and resource con-
straints. As a result, the impact of project-level decisions (e.g. adding resources or budgets) can be evaluated
given the total resource pool or available budget, and as a result, on what other projects might be better choices.
 Stakeholder Involvement: Project management related decisions usually require an expert from a more, silo-
focused team to be involved; senior management is not expected to contribute to the process (unless a big-
budget project is on the line).
Given the “game-plan” nature of PPM, and its impact on the organization’s overall strategy, a cross-business sen-
ior team is involved throughout the lifecycle of the portfolio. This allows the identification of cross silo redundan-
cies which are all too common in many companies. (In one such case that the authors were involved in, a compa-
ny had discovered eight different instances of a documentation system each with a different vendor involved!).
 Success criteria: While PM focuses on ensuring that a project is “successful”, PPM focuses on ensuring that the
project set delivers optimal value to the organization – the emphasis being on set.
 Successful project: a project is considered successful if it delivers the solution on time, on budget, and
meets predefined standards of functionality and quality.
 Successful set of projects: For a project set to deliver optimal value to the company, it must include the
right projects given constraints (resources, budget, risk, etc.) and corporate goals.
To summarize the main differentiator between the PM and PPM disciplines:
 Selecting the right projects does not ensure their successful delivery; and could be as wasteful as the successful
delivery of the wrong projects.
 Even when the right projects are being delivered successfully, resource utilization may still be sub-optimal; opti-
mally sequencing could help include more projects within the given constraints.
PM and PPM: Complementary Disciplines
Let’s turn now to the synergies between PM and PPM: how can these disciplines be operated in parallel in order to
achieve the best results? To illustrate this point, we will use the sports team example:

5. <5>
 Delivering the strategy: individual players, operating independently, cannot execute the game’s strategy as de-
fined by the coach. While each player contributes his own skills and competencies to achieving the overall goal
of winning, only the coach has the “game plan” for aligning these competencies together to execute the selected
strategy. Similarly, whilst each project manager should use her skills to deliver the project on time, on budget
and on scope, she needs to be constantly aware of the role of her specific project within the grand scheme of
things: only a portfolio view will allow the management to ensure that this project is, in fact, contributing to the
delivery of the organization’s strategy. Operating in silos will sometimes deliver on time, on budget, and on
scope – the wrong project.
 Budgetary constraints: think about the following scenario: The team’s management decided to cut the budget
for next year by 25%. Which players should go? Should it be the highest paid? Is it possible to re-negotiate some
of the players’ contracts? Are there any available, potentially cheaper, replacements in the market? Evaluating
each player independently may give the wrong answer; it’s the interaction between them and the synergy they
produce that creates a winning team. Only a high level “player portfolio” view will enable management to assess
their contribution to the overall strategy and to compare various “portfolio” alternatives. The world of the pro-
ject portfolio operates under similar rules; if the company’s board announces a 25% cut in the budget, con-
ducting a project-by-project review without using a “common currency” to eliminate low-priority projects may
achieve the wrong result. What if a project is very important to a business silo manager but does not make the
cut because it is not in line with the overall corporate strategy for that year? What if some projects are pre-
requisites for the delivery of higher priority projects? What if a project is really important, but one can reduce its
scope to decrease cost while maintaining a relatively higher value? These what-if analyses are only possible un-
der a portfolio management framework, where the impact of these decisions on the strategy can be clearly un-
derstood.
 The budget planning (and recruitment…) season: it’s the end of the season, and the coach is starting to plan the
next one. Will a player-by-player evaluation, including those who are on the bench and those available in the mar-
ket, enable him to build a new and improved team? Or should the management first agree on the team’s strategy
(e.g., areas for improvement, strengths that can be leveraged) before identifying the combination of players’ ca-
pabilities that will deliver this strategy?
In the project world, budget planners face the same issues: they are bombarded by project requests from differ-
ent business areas, all promising to deliver the “killer” solution to the organization’s problems (not to mention
pet projects, regulatory-driven projects, and the likes). Should they embark on an independent project-by-
project evaluation, or should they match all requests – as well as existing projects – to a pre-defined strategy, in
order to build the optimal portfolio for delivering this strategy?
• Training the player vs. training the team: Making each player the best in his specific role is done through a spe-
cific training plan, custom-built to address the player’s strengths and weaknesses. However, winning is a team
effort and depends on the coordination between the players, and not only on their individual capabilities. There-
fore, training the player without the team is meaningless; in the same way, training the team together without
focusing on each player’s competencies is as wasteful. Similarly, great project managers will only ensure the
successful delivery of an individual project; we must ensure that the PM discipline is being complemented by the
PPM discipline in order to deliver a successful portfolio of successful projects. Governance training is as critical as
the project management training. Applying the principles of workflow and strategic alignment is critical for the
team to be in synch with the executive management game-plan.
 Risk management – what is the optimal combination of “unruly” players a coach can allow himself in the team
without putting the ultimate goal – winning – at risk? Analyzing the risk and behavior patterns of each player will
give us a good starting point. However, taking the risk assessment to the team level will allow the coach to bal-
ance the risk across the team and to develop a risk mitigation strategy that will better address the situation.
Risk analysis at the project level will yield similar benefits. However, only consolidation of these risks to the
portfolio level will allow the decision makers to have a proper view of their cross business and cross project in-
vestment risks, and to ensure the portfolio is properly balanced.

6. Conclusion
The key focus of this article is something that every business and technology manager today intuitively understands:
a combination of project management and portfolio management tools and methods is required to achieve efficiency
and effectiveness in project investment planning and implementation.
This combination will be achieved when the business managers get involved in decision making and ongoing manage-
ment of the portfolio across business silos, and the technology manager has more understanding of business needs
and provides better transparency into the projects that deliver the business strategy.
A situation where the technology manager delivers a project simply because a business silo manager has demanded
it is an anachronism. An organization that continues to use this approach will reduce its competitive advantage over
time because of gross inefficiencies in three areas: redundancies across business silos, poor project prioritization, and
poor communication between the business and IT.
New tools and techniques are allowing executives to proactively manage their portfolios, choosing the set of projects
that will best support corporate strategy for that planning period and monitoring status during the implementation
to fine tune and adjust the investments.
This new paradigm, together with proper governance, must be learned and communicated to the entire group of
stakeholders involved in decision making; it reinforces the importance of investing in projects that support what is
important to the company as a whole and delivering those projects on time, within scope and on budget.
# # #
1 Battery Park Plaza, 4th Floor, New York, NY 10004, (212) 965-0550, www.umt.com