Project Portfolio Management

Resource allocation is a critical component of PPM. Once it is determined that one or many projects meet defined objectives, the available resources of an organization must be evaluated for its ability to meet this project demand (aka as a demand "pipeline" discussed below). Effective resource allocation typically requires an understanding of existing labor or funding resource commitments (in either business operations or other projects) as well as the skills available in the resource pool. Project investment should only be made in projects where the necessary resources are available during a specified period of time.

Resources may be subject to physical constraints. For example, IT hardware may not be readily available to support technology changes associated with ideal implementation timeframe for a project. Thus, a holistic understanding of all project resources and their availability must be conjoined with the decision to make initial investment or else projects may encounter substantial risk during their lifecycle when unplanned resource constraints arise to delay achieving project objectives.

Beyond the project investment decision, PPM involves ongoing analysis of the project portfolio so each investment can be monitored for its relative contribution to business goals versus other portfolio investments. If a project is either performing below expectations (cost overruns, benefit erosion) or is no longer aligned to business objectives (which change with natural market and statutory evolution), management can choose to decommit from a project to stem further investment and redirect resources towards other projects that better fit business objectives. This analysis can typically be performed on a periodic basis (eg. quarterly or semi-annually) to "refresh" the portfolio for optimal business performance. In this way both new and existing projects are continually monitored for their contributions to overall portfolio health. If PPM is applied in this manner, management can more clearly and transparently demonstrate its effectiveness to its shareholders or owners.

Implementing PPM at the enterprise level faces a challenge in gaining enterprise support because investment decision criteria and weights must be agreed to by the key stakeholders of the organization, each of whom may be incentivised to meet specific goals that may not necessarily align with those of the entire organization. But if enterprise business objectives can be manifested in and aligned with the objectives of its distinct business unit sub-organizations, portfolio criteria agreement can be achieved more easily. (Assadourian 2005)

From a requirements management perspective Project Portfolio Management can be viewed as the upper-most level of business requirements management in the company, seeking to understand the business requirements of the company and what portfolio of projects should be undertaken to achieve them. It is through portfolio management that each individual project should receive its allotted business requirements (Denney 2005).