Resource, Time Scarcity Accelerates Project Portfolio Management Tech
October 22, 2014
Today's rapid innovation cycles have companies searching for technology solutions that can help decision-makers get a handle on their product development pipelines. The competition is intense, and resources are limited, so executives need tools that can help them direct precious resources to product development efforts with the most potential for market success.
This need has led to the development of a class of solutions known as project portfolio management (PPM) or enterprise project portfolio management (EPPM). The key capabilities in such solutions generally include pipeline management for keeping track of the status of projects; resource management such as monitoring and deployment of funds, people, and inventory; change control for assuring that the organization always has one "version of the truth" for any project; financial management for tying the project portfolio into the organization's financial control systems; and risk management for continuous evaluation of project uncertainties.
PPM consultant Lee Merkhofer wrote in a paper on PPM tools that, at its best, this class of solutions applies, to any kind of project portfolio, the same methods that have proven successful in the field of financial investing. "New projects are formally evaluated, prioritized, and selected; existing projects may be accelerated, slowed, or terminated; and resources are allocated and reallocated based on maximizing the value created by the project portfolio," he wrote.
Merkhofer's paper includes a list of more than 100 PPM tools and some direction on how to choose the right tool for an organization's needs. He cautioned that many project management applications claim PPM functionality, and he excluded them in his list unless they provide "some support for project selection, prioritization, or portfolio optimization."
Given the complexity of product development in the automotive industry, car manufacturers are unsurprisingly making extensive use of PPM solutions. For example, one large European company employs the PPM platform developed by Planisware, a French company with U.S. headquarters in San Francisco, for global planning across its engineering. High-level portfolio management allows each business unit to synchronize its respective schedule with the company's centralized master milestones for its vehicle lines. The system has about 8,000 users, including 1,000 project managers.
In an inteview with ThomasNet News, Antoine Villata, COO of Planisware USA, said a PPM solution allows an organization to "manage from the ideation stage all the way to launch and sometimes past launch" more efficiently, by "keeping track of all the levels of complexity."
The value of PPM solutions goes beyond product development and can be applied to various industries and verticals. Research firm IDC, based in Framingham, Mass., identifies several key areas where PPM solutions are gaining adoption, including:
- IT project portfolio management
- Professional services, such as consulting and system integration
- New product development in a range of industries
- Capital project management for engineering, construction and development
IDC predicts a steady 7.8 percent yearly growth rate in global demand for PPM solutions over the next few years from $3.9 billion in 2013 to a respectable $5.7 billion in 2018.
IDC sees the need for effective prioritization of projects as a key PPM driver, because of today's "brittle financial environments." Resources are limited, forcing organizations to prioritize and optimize development on the most feasible and profitable products. "Global 2000 organizations continue to struggle with the complexity of project, program, and product delivery while seeking to manage economic and political volatility as operational and business needs change and swirl dynamically," said IDC program director Melinda Ballou.
The increasing complexity and speed of innovation and product development can have a profound effect on company profitability, according to research from Randoph, N.J.-based publisher Consumer Goods Technology. A survey of consumer goods firms by the company found that only 50 percent of new products meet profit objectives, 42 percent of companies can't tell whether their portfolios are aligned with strategic targets, and resources are stretched too thin because of too many projects at 59 percent of firms.
Traditionally, project managers and project management offices (PMOs) scattered across companies have relied on their own methods and software tools to manage projects according to their business units or geographical offices. Such tools might have included spreadsheets, PM software such as Microsoft Project, homegrown solutions, and even manual systems of files and forms.
The adoption of EPPM systems does not necessarily do away with these individual systems, which might be essential to get the work done on the ground, but they do take a more top-down, enterprise-wide approach to unify efforts. According to Margo Visitacion, an analyst at Cambridge, Mass.-based research firm Forrester, teams can continue to work with their own tools that provide specific support for what they need locally, but the sharing and communication of data allows them to manage cadence, dependencies, and performance. Portfolio management tools provide the context to the work, with communication hubs that ensure execution and strategy remain aligned.
Planisware's Villata stressed the increasing speed of innovation today as an important driver for PPM adoption. Taking a cue from IT development, manufacturers of physical products "are moving toward a more agile type of development" characterized by rapid iterations of new product versions. This makes it more urgent for an organization to keep everyone on the same page, at every level and every location. "The objective is to reduce the cycle time," he said, "to launch the product as quickly as you can."