As businesses tighten their belts in response to the recession, they're turning to project and portfolio management software to help them identify which IT projects are mission critical and to help them execute those projects as efficiently as possible.

Increasingly, they're opting for software as a service (SaaS) versions of project management and portfolio management solutions because software as a service is cheaper and easier to deploy than traditional, on premise software, according to tech industry analysts and customers who've gone the SaaS route. (SaaS is also known as hosted or on demand offerings.)

Melinda Ballou, program director for IDC's application lifecycle management research, says demand for software as a service versions of project management and portfolio management tools was on the rise prior to the collapse of the financial services industry in the fall, and that despite the recession, she expects demand for hosted project portfolio management (PPM) solutions to continue. The market for IT project portfolio management software is expected to hit $791.6 million in 2008, up from $679 million in 2007, according to IDC's estimates. Software as a service versions of project portfolio management solutions are a growing segment of the larger IT project portfolio management market.

"On demand PPM tools don't require a huge investment upfront to deploy and implement—both the cost and risk are significantly less," says Ballou. "In addition, companies urgently seeking to better coordinate increasingly scarce resources across projects, programs and portfolios can get the functionality benefits very quickly."

Tale of Two Companies That Used Hosted Project Management.

Cost and the need to improve service were on the minds of executives at Chicago's Department of Public Health and 24-by-7, a small, Denver-based provider of telephone maintenance and installation services, when they selected hosted project management software from CA and Clarizen respectively, to help them run their businesses.

Carlo Govia, the Chicago Department of Public Health's CFO and first deputy commissioner, says his organization went with a software as a service project portfolio management solution to avoid maintaining software in-house. "It's not a cost-effective way for us to manage our infrastructure," says Govia. "We thought it was better to outsource that functionality so we can focus on the core health services we provide."

Indeed, the Chicago Department of Public Health will begin using CA's Clarity PPM On Demand solution in early 2009, to measure the effectiveness of the health services the department provides, to better orchestrate evacuation exercises and simulated outbreaks of chemical and biological agents, and to better manage grant money, says Govia.