What is Project Portfolio Management (PPM) software? How does it deliver value to a project-driven enterprise in a way that is different from enterprise project management (EPM) or even a good project-driven enterprise resource planning (ERP) application?
Does a manufacturer today even really need PPM software?
Ideally, PPM and EPM should be part and parcel of a single project-based ERP solution. Yet vendors still sell standalone PPM software, standalone EPM software and standalone ERP.
Each of these applications must then be integrated in some fashion through a complex, risky and extremely expensive development project in order to provide an enterprise computing environment suitable for an engineer-to-order manufacturer, engineering procurement and construction contractor or other project centric business.
So let's discuss the differences between PPM, EPM and Project ERP and the extent to which they can all be delivered by the same system, effectively eliminating the need for PPM software entirely.
After all, if a single application can fulfill the roles of three separate applications; this can mean huge savings in software licensing costs.
Alphabet Soup
The enterprise software industry is rife with three letter acronyms (TLAs). And PPM and EPM are only the tip of the iceberg. PPM can also stand for Program Portfolio Management or Product Portfolio Management. And EPM can also stand for Enterprise Program Management. These differently-named offerings are often sold by the same vendor!
This, to say the least, is confusing. So to help sort things out, we consulted ARC Advisory Group Senior Analyst Dick Slansky, an expert on project management and project management software.
In our recent podcast, Slansky suggested that the underlying PPM and EPM solutions are essentially the same thing, but vendors use different names for them depending on the industry to which they are trying to sell them.
"You've got all these different offerings that get turned around and relabeled probably based on what the product is and how they are trying to market it," Slansky said. "Another way to look at these definitions and how they are used is based on the industries that use them… Some companies are very program-driven and thus project-driven. So there would be elements of engineering organizations, and the projects that move through those engineering organizations. Whereas another company can be very ERP-centric, and their focus could be on the portfolio management at a higher level."
According to Slansky, certain terms and definitions are more often used in different verticals. An engineering, procurement and construction (EPC) company is very much project driven, and uses complex project management tools. Portfolio management may more often be associated with a manufacturing company that makes products. So they are managing a portfolio across the product lifecycle.
In my own experience, I see the most intense interest in portfolio management software among companies deliberately selling and managing discrete projects and those involved in managing portfolios of sizable and expensive capital assets.
An EPC contractor will have an obvious need to manage a current and future project portfolio. And a utility company or large process manufacturer will need to manage their investments across a portfolio of assets to ensure maximum return on capital.
These asset-intensive companies may be the most interested, today, in portfolio management. And among these companies, as Slansky suggests, there is no consistent terminology.
To my way of thinking, portfolio management, be it across products, projects or programs, really involves similar functionality aimed not at day-to-day project management of milestones, resources, people and deliverables. Rather, it is designed to handle the overarching project, program or product environment including current and future needs and demands on resources.
A Clearer Picture
So it becomes apparent that PPM is different from an execution-related application like EPM in that EPM is designed to facilitate day-to-day project delivery and project management.
PPM, in its various incarnations, is provides visibility into performance and resource demands of current projects, but also projects that are being bid, sold, or will start at a future date. This allows senior management to marshal the appropriate resources to ensure that commitments can be met and the business is on track for growth projections.
Popular definitions for PPM suggest that it would encompass the following:
- Pipeline Management
- Resource Management
- Change Control
- Financial Management
- Risk Management
All of these functions are highly desirable for an organization with multiple, mission-critical programs, projects or product management processes.
But how well does it meet the needs of day-to-day project management?
Comparisons between popular PPM products and project management tools suggest that many PPM tools have gaps in the area of actual project management.
PPM software may not support things like milestones, Gantt charts, budgeting, calendars and time sheets required for day-to-day project management.
This is the strength of EPM – managing activities, schedules and work breakdown structures. Multiple projects would then be aggregated and consolidated in a PPM solution in order to manage the overall priorities of the organization.
Oftentimes, software users may find themselves exporting data back and forth between separate EPM and PPM applications.
But where does that data originate from? Where is most of the work performed? What is the true system of record for the company?
More often than not, that is an ERP application.
All Together Now
At what point can a single application, that ERP system of record, deliver both EPM and PPM functionality?
This singular, unified approach is desirable because projects do not happen in an organizational vacuum. Projects can impact the organization from a financial standpoint, and many organizations do integrate a project management application with their ERP from a financial standpoint.
But what about other dependencies between the project and the rest of the enterprise? How are those accounted for?
Someone managing an enterprise project may need visibility into human resources to evaluate the skills and competencies of your resources, often across international boundaries. How does a project manager get that global view?
Inventory and supply chain management is also critical to the timely completion of projects, and even if a project management tool includes inventory management functionality, it is duplicating functionality and data from a separate ERP application. Moreover, project managers probably have enough details to track without taking on roles that ought to be performed by the purchasing or supply chain departments.
So it becomes apparent that a strong project-oriented ERP application may be more attractive than separate ERP and EPM applications.
But what about PPM? Can ERP also encompass the functions of a portfolio management solution? Can it take into account financials in such a way as to manage risk and the financial resources of a portfolio of projects?
The answer to that question is yes.
"Can an ERP system support all this – well yeah," Slansky said in our podcast. "ERP has become way more than just kicking out a shop order at the end of the day. It has become, to use the term, this portfolio of products that can be very project-driven."
I have seen firsthand how ERP product offerings have added a lot more specific project functionality, not only to execute and work on projects, but to offer different views of the project.
Because a project manager will want to manage immediate priorities; what activities are due to happen by whom and when. Finance may want to take a slightly different view to determine where costs and revenue recognition is going to occur.
One way to get to PPM through ERP is through corporate performance management (CPM). CPM functionality can be built into ERP to allow users to align the business strategy fully from end to end within the solution and flag any activities that are not meeting the overall strategy and objectives of the company.
PPM for risk management is of particular interest to industries like oil and gas and engineering procurement and construction contracting – or in fields that require heavy project accounting like aerospace and defense. These companies are running multiple projects that can all contribute to organizational risk, so management must be able to determine current risk levels as the project portfolio changes. Project ERP with CPM can allow executives to determine what level of risk is acceptable to the organization and leverage what-if and predictive analytics to ensure the organization is on sound footing.
Conclusion
The distinction between EPM and the various facets of PPM should be relatively clear: EPM supports day-to-day project management; PPM supports overarching management of current and pending projects.
Definitions become less clear as we look at the role that ERP can play in delivering the functionality of PPM, EPM or both.
Certainly, not every ERP product will be project-centric enough to replace or eliminate the need for standalone project software.
But project-driven organizations may realize more streamlined operations and lower total software license costs by selecting and implementing ERP that can meet most or all of their project and portfolio management needs.
As IFS Global Industry Director for Project-Centric Industries, Kenny Ingram is intimately involved with industries including construction, contracting, engineering, infrastructure and shipbuilding, oil and gas, energy, utilities and defense. Kenny has been with IFS for 16 years and has worked in the business systems marketplace for over 20 years.
