The IT portfolio management process is a method of rationalizing an organization’s suite of IT applications to meet business needs. IT portfolio managers analyze existing applications, current and future projects to identify gaps and improvement opportunities within an organization’s IT portfolio. On a cyclical basis, an IT organization is allocated funding to address these opportunities in addition to ongoing maintenance, operations and support.
According to a 2002 META Group report, IT organizations are often challenged to “operate as a business investment center” for their company. Adopting this viewpoint requires portfolio managers to focus on the mix of applications and deliver the best value to their business partners at a cost-effective price. Managing an IT portfolio increases the need to understand the overall portfolio health in terms of individual project status, financial impact, risks, rewards and the state of the IT architecture for all the projects in the portfolio. Understanding the health of the underlying IT architecture is just as important as understanding the status of the applications and projects supporting an organization’s business process.
In recent years, software vendors and IT consulting organizations have launched new engagement efforts to assist organizations with the IT portfolio management processes. Marketing presentations filled with colorful bubble charts and project scorecards can often motivate IT organizations to purchase the tool and choose to apply the processes supported by the tool. Implementing a tool without defining the process always carries inherent risk. Organizations are complex with their own custom business rules and organizational acronyms and jargon. Prior to selecting a tool, the organization should examine their current and future state portfolio management processes.
The next few articles will highlight the goals and benefits of portfolio management and to outline a flexible portfolio management process framework. The framework allows organizations to develop their own processes and apply supportive tools and techniques as applicable.
IT Portfolio Management Goals
A 2002 survey conducted by META Group, Inc. identified a variety of portfolio goals across IT organizations using portfolio management solutions. The organizational goals included:
Create single source of all existing IT assets, initiatives and potential investment opportunities
Provide visibility of IT projects and relative value to senior management instead of an independent review
Identify the best mix of projects faster to enable business processes
Facilitate executive decision making
Manage organizational budgets and prioritize projects relative to the overall IT budget
Portfolio management processes exist to provide organizations with better insight to the ongoing spend and future investment in IT products and services. Gaining insight into a portfolio’s program, projects and applications enable the portfolio manager to align IT assets with the IT strategy. From the CIO to the project manager, all stakeholders need to understand the projects within the portfolio and how they align with IT strategy.
Executives have a broad, high-level view to the programs and projects supporting business processes. Department managers need to know the current project and application health in their department level portfolios. Project managers also need a single method to report status of the projects in the portfolio instead of generating different status reports for the same project.
Well-implemented portfolio management processes allow stakeholders at all levels of the organization to view the portfolio data and make strategic and tactical decisions. According to Pacific Edge, an IT portfolio management tool provider, the goal of IT portfolio management “is nothing more or less than the art and science of achieving the best value for a company’s IT investments”.
IT Portfolio Management Benefits
The META Group survey also identified several benefits from implementing portfolio management processes, including:
Executives have centralized information that improves their understanding of the assets within their portfolio
Managers closely monitor costs
Redundant projects are identified and project scope is modified to combine with other related initiatives.
A project manager with Schlumberger Limited, a global oil field and technology services company, summarized the project manager’s viewpoint of the benefits of a portfolio management solution: “At least I don’t have to do 16 different status reports every month on my project anymore.”
Integrating portfolio management processes with day-to-day project management activities increases communication without the burden of completing another status report. Implementing a portfolio management process also allows IT organizations to make data-driven decisions by comparing each projects relative cost and business value as a whole rather than considering each project independently.
Similar to stock portfolio analysis, IT portfolio management requires measuring risk and reward with the yearly IT budget. Adopting a portfolio management process allows IT managers to cancel or defer projects if a project investment if struggling or providing low return to the business organization. Portfolio management processes allow management to view all the assets in their portfolio and make the best decisions based on all of the information instead of basing their decision on a portion of information.
Understanding these goals and benefits of a portfolio management process will help managers understand their needs before jumping into a system implementation. Once portfolio managers understand the different processes within portfolio management, a specific tool can be selected to meet the IT portfolio management needs.