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Software Portfolio Management: Tools and Methods

You must have learned by now that software portfolio management helps to upgrade, assess, and improve your projects and programs. Sometimes, you have to remove former projects to make way for newer ones. But, how do you know what is really going on in your software portfolio? In this article at R&D Today, CJ Farrukh and co-authors explain software portfolio management tools and methods.

Rules of Software Portfolio Management

To standardize software portfolio management, you must follow specific rules and leverage tools and methods. Let’s find out below what they are:

What Are the Approaches?

Theoretically, it is all about getting the maximum benefit from a portfolio within budget and resource constraints. This selection method is hardly practical because you often do not have a complete picture of the funding process at the beginning of the project. Additionally, project selection is not always straightforward.


There are several metrics based on which software portfolio management is possible to perform. Here’s how you would know what is really going in your software portfolio:

  • Net Present Value (NPV): It calculates your project’s worth using a simple profit and cost calculation.
  • Internal Rate of Return (IRR): After initial project spending, you should come across a break-even period for the project where the cost and profit are the same. The more the IRR, the greater your benefits are.
  • Risk and Uncertainty: Calculate risk costs by multiplying the expected benefit with the project success rate.

What Should You Score?

You may not have accurate financial reports at the early stages of software portfolio management. This could lead to the wrong prioritization of projects. With the scoring model, you can deduce a near-perfect estimation for project selection. It can be “unique product features, size of market, the ability to leverage the company’s core competences,” explains Farrukh.

Handling Several Projects

Not all of your projects will produce deliverables at the same time nor their returns. That is not an ideal scenario for an organization. Your software portfolio should be active with continuous value flow. So, spread your resources and budget accordingly.

What About the Risky Ones?

High-risk projects also come with high benefits. So, it is futile to ignore them or keep them at bay. Ensure that every software portfolio has high-risk projects along with some low-risk ones to balance it. Use a risk-reward profile, also known as ‘bubble diagrams’, to measure the portfolio’s performance.

For comprehensive software portfolio management, you should have a checklist of the above activities. That will enable you to reach a stable but flexible portfolio landscape.

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