What is Project Portfolio Management (PPM)? Project portfolio management (PPM) is a structured approach to aligning projects with organizational strategy. It evaluates project value and risks, ensures efficient resource allocation, and provides oversight to help maximize portfolio outcomes. Demo SPM
Things to know about project portfolio management (PPM)?
What does Project Portfolio Management include? What is project portfolio management vs? Why is project portfolio management important? What are the benefits of PPM? What are some challenges of implementing PPM? What are the five steps of PPM? What are essential tools in PPM? What does a project portfolio manager do? What industries benefit most from PPM? Project Portfolio Management with ServiceNow

Business success is built on successful projects. Unfortunately, knowing which projects to pursue and how to optimize them toward strategic goals can be a complex challenge. With numerous initiatives competing for resources and attention, organizations need a clear way to evaluate and prioritize their efforts. And, as businesses increasingly rely on digital transformation strategies, integrating technologies like artificial intelligence (AI), cloud computing, and advanced automation solutions can further complicate project management efforts, requiring a more structured approach. 

Project portfolio management (PPM) addresses this complexity by providing a framework to align projects with business objectives. PPM helps organizations identify high-value initiatives, allocate resources efficiently, and adapt to evolving priorities, ensuring every project contributes to overall success. 

Expand All Collapse All What does Project Portfolio Management include?

Project portfolios are made up of programs, processes, operations, and projects grouped together based upon their strategic importance to an organization and its goals. PPM helps align projects with the organization’s strategic objectives, ensuring optimal resource allocation and delivering maximum value. This is made possible through several essential elements: 

  • Portfolio strategy
    Defining the organization’s portfolio goals, objectives, and priorities ensures that projects align with strategic business aims. This step sets the foundation for evaluating and managing projects effectively. 
  • Project selection
    Assessing and selecting projects based on their potential impact, alignment with strategic objectives, and resource requirements ensures that the organization invests in projects with the highest potential value. 
  • Resource allocation: Distributing resources such as budget, personnel, and time across the portfolio helps ensure that no single project is over- or under-funded. Resource allocation is responsible for maintaining the organization's ability to support all of its critical initiatives.
  • Performance monitoring
    Tracking project progress, costs, and outcomes allows organizations to evaluate whether the portfolio is on track to meet strategic goals. This includes identifying deviations and implementing corrective actions when needed. 
  • Risk management
    Identifying, assessing, and mitigating risks helps ensure a balance by considering the risk-reward ratios for individual projects (and the portfolio as a whole). 
  • Communication and reporting
    Sharing portfolio performance, progress, and challenges with stakeholders—including senior leadership and project teams—supports informed decision-making and promotes accountability. 
  • Continuous improvement
    Regularly refining PPM processes by evaluating portfolio performance, enhancing project selection criteria, and optimizing resource distribution ensures that organizations can adapt to evolving business priorities.
  • Portfolio optimization
    Continuously reviewing and adjusting the portfolio maximizes value, balances risks, and ensures that investments align with strategic goals. This element focuses on delivering the greatest organizational impact from available resources.
Strategic Portfolio Management: The thing you’ve been missing Learn about the benefits of Strategic Portfolio Management from ServiceNow and how it empowers organizations to plan better to drive business outcomes. Get Ebook
What is project portfolio management vs. project management?

Given the similarity in the naming convention, the terms ‘project portfolio management’ and ‘project management’ are sometimes used synonymously. However, they describe two different strategies, each with their own associated use-cases and objectives. 

Project management is a broad term, describing the strategies, tools, and techniques used in managing a project. Projects are temporary; they exist for a specific amount of time and ideally result in a finished product or service. Project management offices (PMOs) and project managers use project management to assist in the completion of projects by setting costs and budgets, allocating resources, assigning responsibilities, and reporting to stakeholders.

Project Portfolio Management coordinates and analyzes the possible value of collections (portfolios) of related projects, programs and demands. PPM is a higher-level approach that links project management to enterprise management, helping businesses select projects based upon how well they align with or support company objectives. 

To summarize, project management is about doing things right, while PPM is about doing the right things. These two approaches complement each other by focusing on different (but related) aspects of organizational success.  

Why is project portfolio management important?

By bringing initiatives and objectives together, PPM ensures that resources are directed toward the projects that offer the greatest value objective. In organizations with numerous competing priorities, this strategic alignment establishes a clear pathway to achieving goals while minimizing wasted effort. Without PPM, businesses risk investing time and resources into initiatives that are unlikely to support long-term growth.

PPM also brings structure and consistency to how organizations manage their projects. It centralizes decision-making processes, establishes clear governance frameworks, and promotes the use of standardized methodologies and tools. At the same time, PPM integrates risk assessment and management into its processes, enabling businesses to mitigate potential threats that might otherwise get overlooked.

Ultimately, PPM empowers organizations to make informed, value-driven decisions—adapting to shifting priorities while maintaining a focus on the objectives that matter most. 

What are the benefits of project portfolio management? 

PPM offers a holistic, real-time view of the status and health of project groups, as well as their associated resources and interdependencies. When used effectively, this provides a few key benefits.

Improved project selection

Business success depends on organizations choosing the right projects based on goals, risks, resources, etc. Unfortunately, the selection process is not always clear, often leading to businesses taking on projects that fail to align with strategic goals. At other times, individual decision makers or even entire departments may become too focused on pet projects, using valuable time and resources pursuing projects at the cost of other, more-valuable options. 

PPM facilitates an improved project selection process by incorporating reliable data, scoring models, and other quantitative and qualitative approaches to ensure that projects are selected based on relevant criteria. At the same time, current projects that are not contributing to the organization's objectives can be easily and objectively identified and removed from the portfolio.

Minimized organization risk

Project risks don’t exist in a vacuum; they are closely tied to the potential for return, making certain risks justifiable while others are not. PPM gives businesses a clear view into the risks vs. returns of entire project portfolios, revealing which risks are worth taking, and which are not.

PPM estimation tools provide analysis of project costs and compare them to potential benefits, and built-in alerts help PMOs, and project managers quickly identify and resolve delays, budget overruns, and technical issues before they can create larger problems.

Correctly implemented, project portfolio management minimizes project risk, allowing organizations to refine their portfolios to include only the projects that offer enough value to offset potential risk.  

Enhanced communication

When projects are evaluated and managed individually, it can create silos between individuals, departments, and decision makers. PPM brings these stakeholders together, allowing them to coordinate holistically on the entire portfolio of projects, and creating a more-cohesive team.

PPM breaks down barriers between projects, giving business leaders a wide view of the overall impact of related projects, rather than forcing them to only evaluate and choose from a limited number of specific projects. This means an improved communications flow that includes everyone involved, as well as more-informed decision making.

Reduced project delivery times

Taking a project from conception through to delivery involves a complex set of actions. Unforeseen factors can and will create complications, often resulting in project delays and forcing project managers to adjust deadlines while increasing spend. Unfortunately, as projects go over budget and over schedule, their potential returns begin to dry up. Bogged-down projects also divert resources from other essential tasks, impacting the business beyond the scope of the project itself.

PPM incorporates intuitive, real-time reporting, so that managers can identify deviations, bottlenecks, and other issues that may slow or derail projects. They can then take corrective actions immediately, putting the project back on track before it can fall too far behind to be salvaged.

Increased ROI

The end goal of nearly any project is to bring in more revenue than is spent on creating and delivering the project. Return on Investment (ROI) has always been a trusted metric by which to gauge project success, and PPM is designed to ensure that the projects businesses pursue and include in their portfolios are those that will generate a significant positive return on the money and resources invested. 

Through improved selection processes, more-effective communication across levels, reduced project risk, and increased likelihood of projects being completed on-time and within budget, PPM helps ensure that project investments pay for themselves and help grow the businesses that deliver them. 

What are some challenges of implementing PPM?

While project portfolio management offers clear advantages, implementing it effectively can be a difficult process. Understanding the hurdles associated with PPM—and how to clear them—will help businesses maximize the value of their portfolio management initiatives. Top challenges include:

Ineffective resource allocation

Managing limited resources across multiple projects is a common obstacle in PPM. Poor resource allocation can lead to bottlenecks, overworked teams, and delayed project completion, severely reducing portfolio performance. 

Effective capacity planning and resource tracking tools help address this issue. By implementing systems that provide real-time visibility into resource availability, organizations can better anticipate needs and adjust resource allocation as priorities shift. Clear communication between the PMO, senior leadership, and project managers is likewise crucial to ensure high-priority initiatives are adequately supported. 

Inconsistent project prioritization

Without a standardized framework for prioritizing projects, decision-making may become subjective, driven by internal politics or short-term pressures (rather than long-term strategy). This can result in funding projects that add little value while overlooking more vital initiatives.

When ranking projects, the PMO should develop and apply consistent, relevant evaluation criteria—business impact, risk level, resource needs, etc. Additionally, regular portfolio reviews can help reassess priorities in response to changing business conditions.

Insufficient risk management

Risks are an inherent part of managing a project portfolio, especially when overseeing complicated, interdependent initiatives. Many organizations fail to address risks comprehensively, focusing only on individual projects instead of the broader portfolio.

Continuously identify, categorize, and monitor risks at both the project and portfolio levels. The PMO can develop contingency plans to mitigate significant risks and conduct regular reviews to ensure risks are addressed before they escalate. 

Poor communication and stakeholder engagement

Without clear updates and collaboration, stakeholders may lose confidence in the PPM process, leading to misaligned expectations, delayed decisions, and reduced support.

Organizations should establish a communication framework that includes regular updates, progress tracking, and open feedback channels. Tools like real-time dashboards and automated reporting can improve visibility across the portfolio. Additionally, involving leadership in governance and decision-making processes ensures transparency and secures support from key stakeholders.

What are the five steps of project portfolio management?

Although the term project portfolio management can be used to describe essentially any strategy for managing groups of projects, successful PPM tends to follow a series of five established steps. These steps allow organizations to take the complete range of potential projects they may wish to pursue and then refine them until they are left only with those options that meet predefined selection criteria based on ROI, efficiency, risk, strategic alignment, and more. 

In other words, the five steps of PPM help companies establish priorities, clear out unprofitable projects, and focus their time and resources on only the most high-impact projects. They also ensure that all approved projects are working within the company strategy, and that the portfolio is correctly balanced in terms of risk and results.

With this in mind, the five steps are as follows: 

1. Identify the scope of the business and portfolio

Project portfolio management is an essential tool for helping projects contribute positively to business success. But before they can do so, success itself must be defined. Before getting started with PPM, an organization’s strategic objectives must be clearly described, and metrics for evaluating projects must be likewise decided upon. Valuation criteria can take many forms but is generally based either on financial goals or other scoring metrics such as strategy alignment, technical feasibility, or market attractiveness.

Without clear definitions of success and value, businesses are forced to make project selections based on less-concrete criteria, leading to an unbalanced portfolio in terms of risk, reward, or strategic relevance.

2. Manage project ideas

Once strategic objectives have been identified and success and value have been defined, organizations can start to build off this foundation to create project portfolios.

Start by gathering all potential projects, using insights from customer feedback, employees, managers, strategic planning, and compliance and regulation requirements. Next, add current, on-going projects to the project inventory, so that they too can be evaluated, and either justified or discontinued. Gather all data on these projects that will allow them to be rated against the criteria established in step 1. Include estimates on dependencies and resources needed to see each candidate project through to completion—these numbers do not need to be completely accurate at this time; high-level approximations are enough to identify potential projects at this stage, with the understanding that more projects will require more precise validation before execution.

3. Prioritize projects

The next step in the process is to determine which combination of projects will create the greatest possible total value for the portfolio. Using the valuation criteria established earlier, create a chart comparing and ranking candidate projects. Ranks can be established based on estimated financial value or other value scores. Arrange the projects on the chart in order from highest to lowest value.

With all candidate projects ranked, begin allocating available resources, prioritizing highest-value projects. When the resources are all exhausted, eliminate the projects that were not high enough value to receive any resources, creating a cut line and tentatively establishing which projects will and will not be included in the portfolio. This portfolio is not set in stone; it will next need to be discussed, reviewed, and monitored. The project prioritization step simply helps establish baselines and provides data to inform later decision making.

4. Validate proposed projects

The early steps in project portfolio management rely on resource and cost estimates to create a high-level, abstract estimate of project value and returns. But as the portfolio nears completion, these estimates must be validated. Work with those who run the projects, and who can provide more-concrete numbers. Consider possible bottlenecks, skill availability, dependencies, and any other factors that might impact project feasibility.

While there will always be unaccounted-for variations, taking a closer, more-informed look at feasibility will help ensure that only the projects with the best chance of success are included in the portfolio.

5. Measure, monitor, and manage

Once the proposed portfolio has been refined and agreed upon, and the individual projects have been adequately validated, the final step is to put the portfolio into execution. Initiate the projects, and begin to measure performance, monitor each project's progress, and manage them ongoing to ensure that they are meeting the established objectives. 

PMO and project managers need to work closely together in this step and align with the portfolio manager to gather relevant performance data, allocate and reallocate resources, and schedule and initiate reviews. These stakeholders must also be ready and capable of making changes to the portfolio and its constituent projects where necessary. This step is ongoing and will last through the entire life of the portfolio. 

What are essential tools in PPM?

Implementing project portfolio management successfully requires a toolbox of methods, frameworks, and technologies designed to enable better decision-making and strategic alignment. These tools help organizations evaluate, prioritize, and manage their portfolios, regardless of how complex their environment may be.

The following are among the most important tools and techniques in PPM: 

  • Decision tree analysis
    As a visualization tool, decision tree analysis helps evaluate scenarios with multiple subjective factors. It does this by mapping potential outcomes, associated costs, and consequences, and is especially useful for comparing hypothetical situations and solving complex problems.
  • Cost-benefit analysis
    This quantitative method assesses the risk and reward of projects by comparing their anticipated benefits to their projected costs. Projects with higher benefits relative to their costs are more likely to succeed, making this tool a central part of project evaluation.
  • Change management
    Effective change management ensures that transitions within a project portfolio are planned and executed smoothly by preparing stakeholders, addressing resistance, and maintaining communication. This supports the successful adoption of new processes and tools within the portfolio.
  • Agile project management
    Agile principles, which emphasize flexibility, collaboration, and iterative progress, are being increasingly integrated into PPM. Agile frameworks allow organizations to adapt portfolios dynamically, enabling faster responses to shifting priorities or circumstances.
  • Value stream mapping
    This tool focuses on optimizing the flow of work across the portfolio to deliver value faster. Value stream mapping provides improved visibility into processes, helping teams eliminate bottlenecks.
  • Artificial intelligence
    AI-driven tools enhance PPM by automating routine tasks, forecasting project outcomes, and identifying potential risks. AI automation streamlines workflows, while predictive analytics helps inform data-driven decision making across the portfolio.
  • Scoring model
    Applying a scoring model helps balance quantitative and qualitative factors by assigning weights and scores to important criteria (such as return on asset (ROA), business value, and market competitiveness. The final scores help prioritize projects based on their overall contribution to organizational goals.
  • Objectives matrix
    By breaking down a company’s overarching strategy into smaller objectives, this tool provides a structured way to evaluate projects based on how well they align with these goals.
What does a project portfolio manager do?

A project portfolio manager typically takes the lead on PPM initiatives, overseeing the strategic alignment, prioritization, and resource allocation of their organization’s project portfolio. This role involves evaluating proposed and ongoing projects against enterprise goals, prioritizing initiatives based on their potential benefits and challenges, and ensuring resources are being used in the most effective ways.

In collaboration with the PMO, the project portfolio manager defines valuation criteria, sets processes, and selects methodologies—such as agile or waterfall frameworks—for managing projects. They maintain clear communication with company leadership, providing updates on portfolio performance and expected returns. And, as business needs evolve, they periodically reprioritize and realign the portfolio, making adjustments to keep it fully aligned with strategic needs.

What industries benefit most from project portfolio management?

Project portfolio management offers the most value where organizations must manage multiple projects simultaneously. The following are some the industries that see the greatest return on PPM investments: 

  • IT
    Information technology (IT) teams use PPM to manage specialized talent and significant budgets. By leveraging data-driven forecasting, IT teams can prioritize value-creating projects, meet peak demand periods, and avoid resource underutilization.
  • Construction
    Large-scale construction projects can span years, with evolving stakeholder demands and financial constraints. PPM keeps teams focused on long-term objectives, helping them adapt to changing dynamics without losing sight of the overall strategy.
  • Telecommunications
    Telecom companies manage complex IT infrastructure and rapidly evolving technology demands. PPM helps these organizations prioritize investments, optimize resources, and stay competitive.
  • Financial services
    In a sector where accuracy and adaptability are top priorities, PPM enables financial services companies to meet performance thresholds, adapt to trends, and access key performance indicators (KPIs) in real time.
  • Government administration
    Public sector organizations rely on PPM to manage diverse projects, ranging from infrastructure to technology initiatives. This helps make sure that taxpayer resources are used effectively and openly.
  • Automotive
    Automotive companies leverage PPM to balance the demands of long-term R&D projects and fast-moving production schedules.
  • Insurance
    Insurance companies manage portfolios that include regulatory compliance, customer service improvements, and technology upgrades. PPM provides a structured approach to prioritize and execute these initiatives.
  • Nonprofit
    Nonprofit organizations often operate with limited resources, creating a need to balance diverse projects. PPM helps prioritize initiatives that deliver the greatest impact while maintaining transparency for financial stakeholders.
Pricing for ServiceNow Strategic Portfolio Management Get pricing here for ServiceNow Strategic Portfolio Management, which aligns work to business priorities and reduces time to market. Get Pricing
Project Portfolio Management with ServiceNow

A properly managed portfolio can provide significant benefits for any organization, but the complexities of shifting needs and scaling projects can make project portfolio management a very difficult prospect. ServiceNow provides the solution. 

ServiceNow Project Portfolio Management manages outcomes to help organizations create value, embrace uncertainty with flexible planning, and deliver faster portfolio solutions by scaling work. Built on the ground-breaking Now Platform, ServiceNow PPM includes powerful features designed to simplify and optimize the PPM process.

Roadmap planning helps align teams and investments with established business goals. Scenario planning uses what-if analysis to evaluate projects based upon shifting possibilities. Innovation management facilitates collaboration between teams, accelerating efficient idea gathering and evaluation. Investment funding helps allocate vital resources using strategic objectives, portfolios, and business services. Demand management centralizes business and IT requests, improving the investment process for new products and services best aligned to key business initiatives. The end result? Optimal visibility into projects and portfolios, along with improved adaptability, flexibility, speed, and strategic alignment.

Ready to see for yourself? Demo ServiceNow today! 

Get started with Project Portfolio Management

Drive value with an aligned business and IT strategy using our scalable SPM solution.

Explore Strategic Portfolio Management Contacto Us
Resources Articles What is ServiceNow? What is Strategic Portfolio Management (SPM)? What is SAFe (Scaled Agile Framework)? Analyst Reports Forrester® report: The Total Economic Impact™ of ServiceNow SPM ServiceNow is a Leader in SPM - The Forrester Wave™ ServiceNow a Leader in The Forrester Wave™: Value Stream Management Solutions Data Sheets Drive strategic outcomes with PPM Application Portfolio Management Digital Portfolio Management Ebooks Agile 101: Using Agile project management methods to deliver customer value Creating Organizational Agility How to turbocharge your project management office White Papers Maximizing hybridized delivery models How to Keep People at the Center of Hyperautomation From projects to products: An evolution you need to embrace