One of the most difficult tasks for IT departments is project portfolio management--and, of course, it's also one of the tasks they most need to get right. The challenge can become particularly acute for companies that have experienced dramatic growth. CIOs can find themselves in the dizzying position of assessing the merits of dozens of projects and services, encompassing hundreds of employees.

Not unexpectedly, many business-technology executives trying to make sense of all the projects buy portfolio-management software, which can be very useful. They can aggregate project information into a portfolio-level picture, for example, and highlight where budgets or timeframes are being strained. But execs can't forget that these tools are just that. They aren't strategic thinkers or decision makers. IT departments have to lay the groundwork for a thoughtful, organized approach to their portfolio of projects before buying tools. Critical first steps include: instituting fundamental processes related to project decision-making, and paying close attention to the people involved in the projects themselves.

Take, for instance, the case of a Fortune 500 insurance company which had grown beyond its capacity to manage projects on an ad-hoc basis. Projects were increasingly running over budget and deadline, and weren't producing anticipated benefits often enough. Alarmingly, the company was becoming less discriminating in its project selection. The portfolio was no longer clearly linked to corporate and business-unit strategy. While the company had a wealth of talented people able to develop projects, it had no processes to effectively manage and sort its ever-growing portfolio.

So, the company bought off-the-shelf portfolio-management software. Nine months and hundreds of thousands of dollars later, the CIO found that budgets and deadlines were only marginally better hit, and the strategic focus of the portfolio was no more clearly defined.

Ways To Avoid Wasting Effort
How does one avoid pouring time and effort down the drain? While there's no perfect-world prescription, there are some common moves to take.