It's hard enough trying to run one development project, let alone several. Managing a whole portfolio of projects across a business can easily be compared to juggling Faberge eggs in a tornado, with only one arm.

Projects need to be delivered on time, to the original requirements. Resources need to be deployed appropriately – whether they're staff or infrastructure. Then there's the really tricky bit, making sure that all the projects are aligned with the business aims. Today's flexible businesses need IT departments that can respond to changing needs – adapting project plans quickly.

It's no wonder that a new generation of project management tools has arrived, tools that are able to bring information in from multiple sources to help control the myriad IT projects that cover white boards and fill spreadsheets.

As IT development moves away from application-centric ways of thinking to service oriented architectures, things get even more complicated, as many different business processes could depend on a single project. Project portfolio management is the key to helping development teams keep control of complex collections of projects, where autonomous departmental IT teams may be reinventing the wheel several times a month.

Taking a leaf out of the finance industry's book, project portfolio management treats projects as a set of investments. An alternative analogy comes from Forrester Research's Jost Hopperman, who compares it to how town planners work.

How does it work?

Projects are assigned priorities based on anticipated returns, and these are used to place resources. However, projects in a portfolio are also linked – so if project A depends on data and services from B and from C, then even if A has the highest projected ROI, B and C are given high priorities, even if they have low or even negative ROI.

Using traditional project management techniques where projects are treated in isolation their low ROI may have even led them to being cancelled. Other metrics are also used to help refine the model, including looking at available staffing resources (and the available skill sets) and the risk associated with a project. It can be difficult to quantify risk – so you'll need to develop a common risk model with the rest of the business.

There's also the opportunity to look to the future and develop scenarios that can help deliver longer term business aims. That's where Hopperman's town planning analogy comes into play, as it's these scenario planning techniques that help define how the projects in a portfolio are chosen.

Scenarios don't define the future, instead they're used to lay out a landscape that helps IT departments choose which technologies and projects will support key business aims. They're also a tool for IT directors and CIOs, who can use scenarios to budget for future work, while still responding to the changing demands of a flexible business.

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The tools of the trade

Often project portfolio management tools are used to wrap existing project management tools. After all, there's no point in implementing new tools when everyone's already familiar with Microsoft Project.

It's not surprising that Microsoft's Project Portfolio Server 2007 (http://office.microsoft.com/en-us/portfolioserver/FX101674151033.aspx) is part of its Project family, and links in to the existing Project Server 2007. Individual projects can carry on using desktop copies of Project, along with team copies of Project Server.

Meanwhile, programme management teams can use the Project Portfolio Server to bring information from across the business into one place. Project Portfolio Server can be used to standardise reporting, with common templates – as well as holding the information in one central repository.

Taking a leaf out of the CRM book, project portfolio management systems gives businesses one place for stakeholders to find information about projects, increasing the overall understanding of just why resources have been deployed, and just where. Common reporting standards are important if you're going to implement project portfolio management techniques.

The built in form tools in Primavera's ProSight portfolio management tool are used to build input screens that can help capture the information you need. Custom forms like these make it easier for users to give you the information you need – and using a web UI there's very little learning curve.

One of the key features of any project portfolio management tool is the ability to manage project governance. Governance is a key component of any programme management discipline, and it's important that each project is well managed if it is to be delivered successfully. There's a lot to consider when defining project governance rules – especially when delivering the components of a service-oriented enterprise. While some portfolio management tools come with governance guidelines, you're most likely to use these as the basis for documenting existing governance rules, and to share them with the rest of the business.

Tools like Microsoft's Project Portfolio Server can be used to take governance rules, and then use them to build governance workflows. You get the option of using bundled pro forma workflows, as well as developing your own. Development best practices are also part of governance, and while most portfolio management tools aren't designed to push development standards to developer's desktops, they can help manage the development process – including marshalling code through test procedures.

IT departments need to be in sync with the rest of the business – there's little point in rushing ahead with the latest technology if there's no actual business benefit. A business' IT strategy needs to be aligned to its goals. Project portfolio management tools need to be part of this process, and the information that's used to determine priorities needs to be available to both sides of the equation – the business stakeholders and the development team.

As businesses need to respond to rapid changes in their operating environment, project management teams need to respond as quickly – if not quicker. Changing conditions mean changing requirements, and these lead to changes in resourcing and in project priorities. The portfolio metaphor is a good one, as stock portfolios are dynamic entities, changing in response to the vagaries of the market. Project portfolios need to change the same way.

Vendor offerings

Hewlett Packard's purchase of Mercury has given it a suite of development management tools to go alongside its operational management tools. This has led to an interesting cross-fertilisation, and the recent launch of its Project and Portfolio Management Centre (http://h71036.www7.hp.com/enterprise/cache/454071-0-0-0-121.html).

There's a lot in HP's offering – from portfolio management and optimisation tools to demand management tools that help track the requests delivered to IT departments. You can make sure you've got a complete history of your organisation's IT requirements, and then use this information to prioritise development plans. There's plenty of scope for project portfolio management to become a key part of your development process. HP's tools can be tied into its quality management suite, so that application and test results can be tied directly into project and portfolio governance.

Project portfolios need to be optimised to account for strategic requirements – as well as handling the constraints of variable budgets and available staff. This is the hardest part of project portfolio management. Any tool you use will need to be able to help you map out the possible scenarios, so your projects always deliver the most value to the business.

There's a distinct cross-over between portfolio management tools and business intelligence, with good project portfolio management tools distilling this information into an easy to understand dashboard that can be shared across the business. Visualising portfolios and portfolio business value is one way of delivering this information. Microsoft's Project Portfolio Server offers several different visualisation techniques, including using bubble charts to show the relative value of projects, and their importance to business strategy.

A similar approach is taken by Primavera's ProSight (http://www.primavera.com/products/prosight/index.asp). Here "investor maps" are used to show the elements of a project portfolio. Business users can drill down into the maps to get more information about specific projects, while portfolio managers can use them to explore different scenarios.

Alongside analysis tools, scorecards help keep information visible. ProSight's scorecards show several different performance indicators, and can be used to show when projects have problems. The performance indicators used include budget, service level agreements, and changes in business value. Project portfolio management isn't really a tool for new businesses or for small businesses.

It's really a tool for large businesses that are managing large numbers of projects across many divisions. Smaller organisations are better placed to understand their development plans, and are more likely to have effective lines of communication between the IT department and the rest of the business. You'll find that it's large enterprises that are more likely to be working with many tens or even hundreds of projects, where there's little visibility on just what's being done where.

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So what are the benefits?

Effective project portfolio management should not only show unnecessary duplications in current projects, the historic information stored can be used to help analyse just how past projects failed. Once that information has been analysed it can be used to define a set of performance indicators that can help show if a project is slipping towards failure.

Project portfolio management tools give programme managers access to a level of business intelligence that hasn't been possible with the old silo-based development process, where the information about the project management process is lost at the end of each project.

You shouldn't expect to be up and running with a project portfolio management solution overnight. Not only do you have to set up a large software implementation (along with its associated infrastructure) and the processes you need to get the most from your tools, you'll have to handle any political fallout from what is at heart a very big change to the way IT is delivered.

Results won't appear overnight, either. You'll need to collate a lot of information before you can analyse your project portfolio in depth. Primavera's ProSight has a set of Fast Track tools to help speed up implementations – though there's still a wait, with most implementations taking 45 to 90 days.

You don't need to implement all the elements of a project portfolio management solution at once. Business Engine (http://www.businessengine.com/index.asp) (recently acquired by Planview) uses a component based approach. You can start with its financial component to handle financial reporting, and then add alignment tools to improve portfolio management, alongside delivery tools and methodology management. By taking a staged approach to implementing a system you can demonstrate ROI as you roll out a system, hopefully increasing buy-in from the rest of the business.

There's another upside to project portfolio management. Once your systems are in place information can be delivered a lot more quickly, so businesses can have a much closer to real time view of project spend. In the past this may have taken weeks or even months to propagate through manual systems and across the boundaries between project management and financial systems.

Tesco has been using Business Engine's tools, and has been able to reduce the amount of time taken producing reports for each of its project managers by four days a month, and it's been able to assemble budget figures three weeks earlier. With project portfolio management tools changes in anticipated spend can be seen quickly, and can be used to make decisions as soon as possible, rather than weeks after the fact.

Project portfolio management can't exist in isolation. As a methodology it demands a deeper and closer relationship between IT departments and business stakeholders. Businesses that want to use it will also need to find ways of bringing IT and business closer, using approaches like the Enterprise Architecture Council (http://www.va.gov/oit/EAM/EAC.asp), where infrastructure, application, and operational architects meet with business architects on a regular basis.

Meetings like this help build a common understanding of the business needs, and of the IT capabilities, and can help provide the prioritisation information that effective project portfolio management needs. It's an approach that can also speed up the delivery of service-oriented architectures. ®