Policy-based management is based on defining a set of global rules, according to which a network or distributed system must operate. In the last few years, policy-based management has begun to emerge as the dominant paradigm for developing network and systems management functions, primarily, since it can reduce complexity in management applications. Although attempts are underway to standardize policy-based management, significant research challenges remain. At KTH and SICS, a joint activity has been started to focus on some of the key issues. The paper outlines the research agenda for this activity.