Due to the need of virtual delivery structures for product development in bigger organizations, there is therefore automatically a need of a portfolio, keeping track of the projects/initiatives. The portfolio is the interface between the line hierarchy and the virtual structures. The portfolio is also responsible for, and keeping track of the thorough planning and prioritization of all the different on-going initiatives in the organization, which can be seen in the resulting road map. From the road map, the portfolio gives the responsibility for operating the initiatives to the virtual delivery structures. The initiatives started by the portfolio need to follow the portfolio strategy, that in turn ensures strategic alignment with company goals, derived from the purpose of the organization.
With a portfolio, the executives, team leaders, team members, and stakeholders get an open and overall view of the initiatives run by the organization.
The need of a portfolio goes for both software and hardware organizations, where the latter normally also have a research organization, that many times is outside the portfolio management. For smaller organizations it is normally enough with a portfolio handling function.
As stated before, it is very important that the portfolio can handle also new product development, which is really the complex part of the product development life cycle. Starting off with a portfolio, that only can handle maintenance and small functional enhancements in an existing product, which is rather a clear (easy) context in an organizational point of view, the risk is high that the portfolio will not be fit for purpose.
Please see here, for more detailed information about the need of a portfolio in product development.